Technical analyst Dave Chojnacki of Street One Financial kicks off the new trading week with a deep dive into the important technical indicators for the U.S. averages, which have gotten off to a very bullish start to the new year.
Mixed signals in the Employment Report on Friday had little impact on the 2018 rally. Prices were higher right from the open and never looked back. Once again, big techs were taking the lead as sector rotation continued. This lead to the Nasdaq 100 (NDX) being the strongest index on Friday, but all three major indices made new record highs. In fact, the S&P 500 (SPX) closed at a new record high every day last week.
At the close, the Dow Jones Industrial Average (DJIA) was up 0.88%, the SPX added 0.7%, and the NDX gained 1%. Breadth was positive, 1.5 to 1, on above average volume. RSI’s continued higher with all three major indices moving into overbought territory: DJIA-80.7, SPX-78.3, NDX-73.3.
The DJIA MACD crossed above signal, joining the NDX and SPX. The ARMS Index ended at 0.95, a nearly neutral reading. The major indices broke out of their consolidation last week: DJIA up 2.3%, NDX higher by 4%, and SPX gaining 2.6%. The VIX fell 16.4% for the week, ending at 9.22. This will be a light week for economic reports, but we do get Retail Sales, PPI and CPI numbers.
Long term, the upside bias continues. All three major averages broke out to new record highs last week. In the last 5 years, the major averages only spent 2 periods below their 50Week MA, in mid 2015 and early 2016. Current 50WK MA: DJIA-21958, SPX-2467, NDX-5829.
The SPX is just 7 points below our target 2750. It now looks like we can hit 2800 before we get a 3 to 5.5% pullback.
Short term, the major averages remain comfortably above their 6 month lows. Near term, all three major averages saw their MACD cross back above signal. They continue to put distance from their 20D-SMA: DJIA-24709, SPX-2681, NDX-6456.
Critical near term support remains at: DJIA- 24708, SPX-2673, NDX-6396.
Europe is higher in early trade Monday, while U.S. Futures are slightly lower in the premarket. There are no major economic reports scheduled for release today.
The SPDR Dow Jones Industrial Average (SI:SPDR) ETF fell $0.16 (-0.06%) in premarket trading Monday. Year-to-date, DIA has gained 2.16%, versus a 2.46% 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 #3 of 80 ETFs in the Large Cap Value ETFs category.