Bearish Catalysts Finally Catch Up To Dow Jones Industrial Average

Technical analyst Dave Chojnacki of Street One Financial examines Tuesday’s big pullback and updates the key technical levels to watch for the major U.S. averages, as geopolitical and natural disasters highlight the risks for today’s investment landscape.

Equities gapped down at the open on Tuesday, and you can pick your catalyst. We had North Korea, Hurricanes Harvey and Irma, and a DACA ruling from the White House. We also had the inefficient Congress come back to work. It was probably all of these factors that contributed to the biggest sell-off in two weeks.

Equities bottomed out in the early PM and attempted to regain some of their losses. By the final bell, all three major indices ended with moderate to significant losses. At the close, the Dow Jones Industrial Average (DJIA) was down 1%, the S&P 500 (SPX) fell 0.76%, and the NASDAQ 100 (NDX) gave up 0.9%. Breadth was decidedly negative, 2.3 to 1, on above average volume.

ROC(10)’s declined, with all three major indices remaining in positive territory. RSI’s also moved lower, with the NDX retaining its lead at 56. The DJIA ended at 46 and the SPX at 51.3. The NDX and SPX remain with their MACD above signal. The DJIA continues below. The ARMS index ended the day at 0.69, a bullish end to the session.

The DJIA had the biggest loss on the day, as Financials were hit particularly hard in the session. The DJIA fell through its 20D-SMA of 21877, and tested its 50D-SMA (21724) during the session, but closed above at 21753. The NDX closed at 5932, which continues to keep it above its 20D-SMA of 5874, and above its 50D-SMA of 5837. The SPX fell through its 20D-SMA (2452) and its 50D-SMA (2453) during the session, but closed above at 2457. Its trend-line is now at 2460, and yesterday’s loss put it back below that level. This gives us some caution for a renewed move to the upside and a challenge to all-time highs.

GLD (NYSE:GLD) (SPDR Gold) continued higher, ending at 127.46. It is now close to its 52-wk high of 129.02. Meanwhile, the VIX was up 20.7% to 12.23 on the sudden volatility spike.

Near term support for the NDX is at 5925 and 5900. Near term resistance is at 5950 and 5975. Near term support for the SPX is at 2453, 2452, 2450 and 2437. Near term resistance is at 2460 and 2475.

Europe is lower in early trade on Wednesday, while U.S. Futures are pointing higher in the premarket. We’ll see a slew of economic reports released today, including International Trade at 8:30am, Redbook at 8:55am, PMI Index at 9:45am, ISM Non-Mfg Index at 10:00am, and the Fed Beige Book at 2:00pm.

The SPDR Dow Jones Industrial Average (SI:SPDR) ETF (NYSE:DIA) rose $0.44 (+0.20%) in premarket trading Wednesday. Year-to-date, DIA has gained 11.86%, versus a 11.10% 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 75 ETFs in the Large Cap Value ETFs category.