Market technician Dave Chojnacki of Street One Financial examines Thursday’s big selloff that caused the major averages to slice through near-term technical levels, and previews what’s ahead as we wrap up the trading week.
Despite decent economic numbers Thursday morning, the major averages moved to the downside. Equities fell further when there were false rumors about Gary Cohn leaving the Trump administration.
The major indices began to recover when this proved false, but then the news of the Barcelona terror attack took the wind out of equities. We have had several terror attacks in the past, and the markets just shrugged them off. This time the major averages were primed and just looking for a reason to sell-off.
We warned of this in our Thursday write-up. The indices ended the day down significantly, and broke some key Technical levels.
At the close on Thursday, the Dow Jones Industrial Average fell 1.2%, the S&P 500 gave up 1.5%, and the Nasdaq 100 lost a booming 2%. Breadth was decidedly negative, 5 to 1, on average volume. ROC(10)s declined, with the DJIA and NDX joining the SPX in negative territory.
RSIs fell, with the major indices now in the 40s and upper 30’s. MACDs remain below signal for all three major indices. The ARMS index ended the day at 1.74, a decidedly bullish reading, as the averages ended at their lows of the session.
All three major indices developed a large ‘bearish’ candlestick in the session. The DJIA fell through its 20D-SMA of 21887, but holds above its 50D-SMA of 21611. The NDX fell through both its 20D and 50D-SMA’s of 5899 and 5808, respectively. Next critical level of support is at 5597.
The SPX has been unable to get back above its 20D-SMA (2468) for several sessions, and yesterday it crashed right through its 50D-SMA of 2450. It closed at 2430, holding just above its 20WK SMA of 2414. It has critical support at the 2405 level.
The Small Cap IWM fell through its 200D MA again, while the VIX spiked 32.4% to finish at 15.55 as volatility returned with a vengeance.
Near term support for the NDX is at 5783 and 5750. Near term resistance is at 5808 and 5825. Near term support for the SPX is at 2414 and 2405. Near term resistance is at and 2450 and 2467.
Europe is slightly lower in early trade Friday, while U.S. Futures are pointing lower in the premarket. The only piece of economic news coming out today is the Consumer Sentiment figure at 10:00am.
The SPDR Dow Jones Industrial Average (NYSE:DIA) was mostly flat in premarket trading Friday. Year-to-date, DIA has gained 11.53%, versus a 9.76% 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 76 ETFs in the Large Cap Value ETFs category.