Market technician Dave Chojnacki of StreetOne Technical Analysis examines Thursday’s big market pullback and previews Friday’s session with a deep dive into the underlying technicals for the major U.S. averages.
Unemployment Claims came in low again this week, and Factory Orders were better than expected. Yesterday’s good reports and the prior session’s strong ISM number have investors concerned with a heated economy and inflation. Bonds continue to move lower as rates rise. The 10YR spiked to 3.20%.
Equities never like rising rates and a sell off ensued right from the opening bell. The major indices reached their lows in the mid-afternoon and a late day rally got the indices off their lows before the close. The NDX was the biggest loser, as big Techs and the FANG stocks were the big losers. All three major indices ended with moderate to significant losses.
At the close, the Dow Jones Industrial Average (Dow) was off 0.75%, the SPX fell 0.82%, and the NDX was down 1.9%. Breadth was decidedly negative, 4 to 1, on above average volume. ROC(10)’s declined, with all three major indices crossing into negative territory. RSI’s fell in the session for all three major indices. The Dow continues to be the strongest at 61.6. The NDX ended at 45.4 and the SPX moved lower to 50.6. The NDX MACD crossed below signal joining the SPX. The Dow is the only major index holding above signal. The ARMS ended the day at 0.57, a bullish indication.
We had the biggest losing session in a long time, and we saw the NDX and SPX move below their 20D-SMA’s. They both also have their MACD’s below signal. These near term indicators foretell caution in the near term. We need to see what happens in the next session, to see if this will be an ongoing sell-off. The Dow closed at 26627 and traded as low as 26471 in the session. The Dow held its 20D-SMA, which now sits at 26368. Its 50D-SMA is now at 25929.
The NDX ended at 7490, below its 20D-SMA of 7541. It continues to hold just above its 50D-SMA of 7479. The SPX closed at 2901, below its 20D-SMA of 2907. It continues to hold its 50D-SMA of 2876. The VIX spiked in the session to 14.22, up 22.4%.
Near term support for the NDX is at 7479 and 7401. Near term resistance is at 7541 and 7625. Near term support for the SPX is at 2888 and 2876. Near term resistance is at 2907 and 2925.
Europe is lower in early trade Friday, while U.S. Futures are mixed in the premarket. The only major piece of economic news out today is the Employment Report at 8:30am.
The SPDR Dow Jones Industrial Average (NYSE:DIA) ETF (DIA) rose $0.19 (+0.07%) in premarket trading Friday. Year-to-date, DIA has gained 8.52%, versus a 8.90% rise in the benchmark S&P 500 index during the same period.
DIA currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #4 of 82 ETFs in the Large Cap Value ETFs category.