Market technician Dave Chojnacki of Street One Financial wraps up the trading week with an in-depth look at the factors pushing the major U.S. averages lower once again, as the late February bounce appears to be in jeopardy.
The market started the day calmly and trading sideways on Thursday, as economic reports came in fairly positively. The Initial Claims number was much better than expected, for example, and the major indices began moving to the upside as Fed Chair Jerome Powell appeared a bit more dovish in comments to congress in the morning.
The major indices began reversing to the down side just after the noon hour, however. This reversal was just after the White House was announcing that it would put tariffs on Steel and Aluminum. Prices fell through the afternoon until the last hour, when we saw stabilization.
Still, the averages ended with significant losses on the day. At the close, the Dow Jones Industrial Average was off 1.68%, the S&P 500 fell 1.3%, and the NASDAQ 100 was down 1.5%. Breadth was negative, 1.5 to 1, on above average volume. ROC(10)’s declined in the session, with the Dow and SPX crossing into negative territory.
RSI’s fell in the session, with the Dow and SPX in the low 40’s and the NDX at 50. The major indices remain with their MACD’s above signal. The ARMS index ended the day at 1.18, a slightly bearish reading. Yesterday’s action left the Dow negative for the year. The SPX ended just 4 points above its 2017 close of 2373. The Dow and SPX found support intraday at near their 100D-SMA’s of 24429 and 2665, respectively. They are both now below their Fibonacci retrace level of 38%.
The Dow closed at 24608 and is now below its 20 and 50D-SMA’s of 24692 and 25280, respectively. The SPX ended at 2677, and traded as low as 2659. It is below its 20 and 50D-SMA’s of 2703 and 2736, respectively. The NDX remains the strongest index near term, holding above its 50% retrace level of 6664. It closed at 6750, holding above its 20D-SMA of 6706. The 10YR. ended the day at 2.80%.
The VIX was up for the third straight session, ending at 22.47, up 13.2%. As long as volatility stays elevated, equities are in danger of further losses.
Near term support for the NDX is at 6706 and 6696. Near term resistance is at 6800 and 6850. Near term support for the SPX is at 2665 and 2650. Near term resistance is at 2703 and 2725.
Europe is significantly lower in early trade Friday, while U.S. Futures are pointing lower in the premarket. The only major piece of economic news coming out today is Consumer Sentiment at 10:00am.
The SPDR Dow Jones Industrial Average (SI:SPDR) SPDR DIA fell $1.68 (-0.68%) in premarket trading Friday. Year-to-date, DIA has declined -0.57%, versus a 0.31% 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 #1 of 80 ETFs in the Large Cap Value ETFs category.