Market technician Dave Chojnacki of Street One Financial kicks off the new trading week with a recap of last week’s action that left all three major U.S. stock indexes at overbought levels.
Prices gapped up on Friday morning as headline Employment numbers and other economic reports signaled a strong and growing economy. For the second week in a row, Techs were strong and led the way on Friday.
AAPL earnings helped to push the big Techs and the Nasdaq 100 (NDX) to the strongest gains on the final trading day of the week. The Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) had smaller gains, but all three major indices ended with new record closing highs. The DJIA and NDX also traded at new intraday highs, while the SPX tied its previous intraday high.
At the close, the DJIA gained 22.9 points, the SPX added just 7.9 points, and the NDX moved up 0.95%. Breadth was slightly negative, on below average volume. RSI’s moved higher, with all three major averages now in the 70’s and slightly overbought.
The ARMS Index ended at 0.96, a nearly neutral reading.
For the week: the DJIA added 0.4%, the SPX gained just 6 points, and the NDX moving up 1.3%. The VIX fell 6.7%, for the week, to finish at 9.14. We see a light week ahead for economic reports, although the earnings deluge will continue.
Long term, the upside bias continues to be strong. All three major indices made new highs last week. The NDX has now been the leader for the last 2 weeks, as healthy sector rotation continues. The major indices are comfortably above their 150D-SMA’s: DJIA-21722, SPX-2454, NDX-5822.
Short term, the upside bias continues methodically. The 6 month closing lows are: DJIA-20606, NDX-5580, SPX-2356. Near term, the major indices are moving into overbought levels. The DJIA and SPX have seen their MACD cross below signal, as their upside move since early Oct. has been minimal. We watch the 50D-SMA for critical near term support: DJIA-22601, SPX-2522, NDX-6025.
Europe is lower in early trade Monday, while U.S. Futures are mixed pre-market. There are no major economic reports on tap for today, so earnings, M&A, and Wall Street upgrades/downgrades will take center stage.
The SPDR Dow Jones Industrial Average (SI:SPDR) ETF rose $0.02 (+0.01%) in premarket trading Monday. Year-to-date, DIA has gained 20.85%, versus a 16.69% 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.