This Year’s Dow Jones Industrial Average Rally Could Be In Jeopardy

Technical analyst Dave Chojnacki of Street One Financial kicks off the new trading week with a recap of last weeks action and an update to the important technical factors affecting the U.S. equities markets right now.

The market opened higher on Friday, as news coming out of Fed’s Jackson Hole symposium was dovish. Equities traded in a roller coaster fashion throughout the day, on low volume. Tech stocks were weak on Friday, keeping the Nasdaq 100 (NDX) in negative territory going into the close.

The Dow Jones Industrial Average (DJIA) and S&P 500 managed to eke out small gains, despite falling off in the last hour. Breadth was positive, despite the fact that the IWM (Russell 2000) remained below its 200-day moving average for the 7th straight session.

At the close, the DJIA added 30.2 points, the SPX inched up 4 points, and the NDX fell 11.9 points. Breadth was positive, 2 to 1, on below average volume. ROC(10’s) were mixed, with the NDX the only index declining and moving back into negative territory. RSI’s were nearly steady and remain in the mid 40’s to 50.

The ARMS Index finished at 1.04, a neutral reading. For the week, the major indices had slight gains: the DJIA added 0.6%, the SPX gained 0.7%, and the NDX up 0.57%. The VIX fell 7.7% to 11.28 on Friday, and plunged 21% for the week. We’ll get the Employment Report at the end of this week, which could wind up spiking volatility once again.

Long term, the upside bias in the markets continues. We have the SPX and NDX holding above their 20WK moving average of 2421 and 5728, respectively. The major indices also remain comfortably above their 200D-SMA’s.

Short term, we have the SPX remaining below its trend-line of 2456 and its 50D-SMA of 2450. The DJIA and NDX are above their 50D-SMA’s of 21670 and 5817, respectively. Short term bias to the upside is in jeopardy, however, with critical short term support at 5597 for the NDX and 2405 for the SPX.

Near term, the weakness continues. We see MACD’s below signal and the major indices below key near term moving averages.

Europe is moderately lower in early trade Monday, and U.S. Futures are slightly higher in the premarket. The only major piece of economic data due out today is the International Trade report at 8:30am.

The SPDR Dow Jones Industrial Average (SI:SPDR) ETF (NYSE:DIA) was unchanged in premarket trading Monday. Year-to-date, DIA has gained 11.65%, versus a 10.42% 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 76 ETFs in the Large Cap Value ETFs category.