Market technician Dave Chojnacki of Street One Financial recaps Tuesday’s earnings-fueled rally and updates the important technical indicators for the major U.S. averages, which are looking increasingly bullish with each passing day.
The market got off to a strong start on Tuesday, as Netflix’s good earnings propelled the Tech sector to the upside. NFLX gained 9.1% in the session and pushed the NASDAQ 100 (NDX) to a significant gain.
Housing Starts and the Industrial Production reports were also slightly better than expected, keeping equities moving higher through the session. The major averages were mostly flat in the PM, but all three major indices ended with significant gains. They also broke through a key technical level, the 50D-SMA.
At the close, the Dow Jones Industrial Average (Dow) gained 0.87%, the S&P 500 (SPX) added 1%, and the NDX was up 2.1%. Breadth was decidedly positive, 3 to 1, on light volume. ROC(10)’s were mixed in the session, with the Dow and SPX declining and the NDX advancing. All three major averages remain in positive territory.
RSI’s moved higher, with the NDX taking the lead from the Dow. The NDX ended at 56.2, the Dow at 55 and the SPX at 55.3. All three major indices continue with their MACD above signal. The ARMS index ended the day at 0.86, a bullish reading.
The major indices had another good session, moving to the upside now 5 out of the last 7 sessions. All three major averages are now positive for the year. It was an important technical signal to see the major indices close above their 50D-SMA. Once again, we saw volume extremely weak, giving little conviction to the move, however.
The Dow closed at 24786, above its 50D-SMA of 24606. The next critical resistance level for the Dow is at 25449. The SPX ended at 2706, closing above its 50D-SMA of 2685. As the averages attempt to regain their recent losses, the next hurdle for the SPX will be to move through the 2800 level. The NDX closed at 6816, pushing right through its 50D-SMA of 6727. The NDX is now poised to test its closing high of 7131. The VIX ended at 15.25, down 7.9%.
Near term support for the NDX is at 6750 and 6727. Near term resistance is at 6850 and 6950. Near term support for the SPX is at 2685 and 2650. Near term critical resistance is at 2741 and 2750.
Europe is trading higher in early Wednesday action, and US Futures are pointing higher in the premarket. Major economic reports on tap today include the EIA Petroleum Report at 10:30am and the Fed Beige Book at 2:00pm.
The SPDR Dow Jones Industrial Average ETF (DIA) rose $0.38 (+0.15%) in premarket trading Wednesday. Year-to-date, DIA has gained 0.17%, versus a 1.25% 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 81 ETFs in the Large Cap Value ETFs category.