See-Saw Action Defines Dow Jones Industrial Average

Market technician Dave Chojnacki of StreetOne Technical Analysis takes a deep dive into the underlying technicals of today’s markets.

With no economic reports to guide the market, investors looked at earnings and markets overseas to set a direction at the open. Poor earnings had equities gapping down at the open and quickly broke key support levels. The Dow was down over 500 points at one point as the sell-off was widespread. While the sell-off was steep it only lasted for the first hour.

The major averages gradually started to move to the upside and began erasing some of the big losses, as all three major indices were below their 200D-SMA’s at one point. CAT was responsible for a big part of the loss in the Dow, as it fell 7.5% on the day. Techs, which were hit early, also came back to erase a good portion of the early carnage. By the end of the day, the losses were small to moderate. The 10YR fell to 3.17.

At the close on Tuesday, the Dow fell 0.5%, the S&P 500 was down 0.55%, and the NDX lost 0.32%. Breadth was decidedly negative, 2 to 1, above average volume. ROC(10)’s declined in the session and remained in negative territory. RSI’s were lower with the SPX the lowest at 32.4. The NDX is now the strongest at 39.7 and the Dow finished at 36.8. All three major indices remain with their MACD below signal. The ARMS index ended the day at 0.91, a slightly bullish reading at the close.

It was an awful start to the session, with the major indices dropping through their 200D-SMA’s. After testing June lows, the averages began to slowly recoup some of the losses. At one point the averages were down 7 to 9% from their recent highs. The Dow closed at 25191, getting back above its 200D-SMA of 25158. It also held above its 50WK-SMA of 25032. The Dow remains well below its 50D-SMA of 25987.

The NDX ended at 7118, moving back above its 200D-SMA of 7062. It holds above its 50WK-SMA of 6960. It closed above its 50% retrace level of 7059. It continues below its 50D-SMA of 7431. The SPX closed at 2740, holding below its 200D-SMA of 2768. It remains below its 50% retrace level of 2755. It continues below its 50D-SMA of 2866. Small-caps continue to lead equities to the downside. The VIX finished at 20.71, up 5.4%.

Near term support for the NDX is at 7062 and 7000. Near term resistance is at 7200 and 7300. Near term support for the SPX is at 2725 and 2700. Near term resistance is at 2768 and 2800.

Europe is higher in early trade Wednesday, and US Futures are lower premarket. The only major economic report on tap today is New Home Sales at 10:00am.

The SPDR Dow Jones Industrial Average (NYSE:DIA) ETF (DIA) rose $1.26 (+0.50%) in premarket trading Wednesday. Year-to-date, DIA has gained 2.58%, versus a 2.94% 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.