Market technician Dave Chojnacki of Street One Financial recaps Tuesday’s market pullback and updates the key technical indicators to focus on as we close out the month of February.
Durable Goods and Housing Price Index numbers disappointed on Tuesday morning, but the market opened mixed and traded choppy for the first part of the morning. New Fed Chair Powell was speaking in DC and his comments regarding the strength of the economy spooked Bond traders as the 10 Year Treasury Yield began rising.
As interest rates rose, equities began falling, and momentum picked up as they day wore on. The 10YR ended the day at 2.91% and the major averages ended down significantly. At the close, the Dow Jones Industrial Average was down 1.1%, the S&P 500 fell 1.2%, and the NASDAQ 100 gave up 1.2%. Breadth was decidedly negative, 3.4 to 1, on below average volume. ROC(10)’s declined in the session for all three major indices, but they remained in positive territory.
RSI’s moved lower, but remained in the low to mid 50’s. The major indices remain with their MACD’s above signal. The ARMS index ended the day at 2.24, a very bearish reading.
The major indices broke their string of three consecutive sessions to the upside and finished near their lows of the day. The Dow and SPX fell back below their 61% Fibonacci retrace levels, but remained above their 50% level. The NDX continued above the 61% level.
All three indices developed an “Engulfing Bearish” candlestick in the session. The Dow closed the day at 25410, just off its lows of the session. It held above its next support level of 25271, which is its 50D-SMA. The SPX closed at 2744, its low of the session. It barely held above its 50D-SMA of 2734.
The NDX closed at 6900, its low of the day. The NDX continues to be the strongest index near term. Its 20D-SMA is now at 6720. The VIX spiked 17.6% to finish at 18.59. It is creeping back to high volatility levels.
Near term support for the NDX is at 6850 and 6800. Near term resistance is at 6950 and 7000. Near term support for the SPX is at 2734 and 2725. Near term resistance is at 2750 and 2762.
Europe is lower in early trade Wednesday, while US Futures are slightly higher in the premarket. Major economic reports on tap today include GDP at 8:30am, Chicago PMI at 9:45am, Pending Home Sales at 10:00am, and EIA Oil Report 10:30am.
The SPDR Dow Jones Industrial Average (NYSE:DIA) rose $0.20 (+0.08%) in premarket trading Wednesday. Year-to-date, DIA has gained 2.66%, versus a 2.84% 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 #1 of 79 ETFs in the Large Cap Value ETFs category.