Technical analyst Dave Chojnacki of Street One Financial examines Monday’s market sell-off and finds that technology names were the biggest losers dragging the major U.S. indexes lower.
The averages moved lower at the open on Monday. The sell-off accelerated after the first hour, but not across all sectors. Big Techs were being hit the hardest, driving the Nasdaq 100 significantly lower. The NDX couldn’t hold the key technical level (50D-SMA), giving the machines another reason to sell.
The NDX closed with a significant loss. The Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) were negative at the close, but with only a small loss. Breadth was actually positive in the session, and we had the IWM (NYSE:IWM) (Russell 2000) make a new closing high of 144.50 and intra-day high of 144.94.
At the close, the DJIA was down 0.24%, the SPX fell 0.22%, and the NDX lost 1.1%. Breadth was slightly positive, 1.2 to 1, on average volume. ROC(10)’s declined, with the NDX crossing back into negative territory. The DJIA and SPX remain in positive territory.
RSI’s also moved lower, with the NDX now the weakest at 42. The DJIA continues as the strongest at 63.3 and the SPX at 59.1. The NDX remains as the only major index with its MACD below signal.
The ARMS index ended the day at 0.93, a slightly bullish reading.
We mentioned the weakness in the NDX last week, as it broke several technical levels. Yesterday it broke the 50D-SMA of 5909, precipitating more selling. It closed at 5867, which was just 11 points above its lower Bollinger Band®. Critical near term support is 5750. It was the Big Tech ‘FANG’ stocks which led the index lower.
The SPX continues above its 9 month trend-line of 2490, closing at 2496. The SPX also closed above its 20D-SMA of 2482.
The DJIA closed at 22296, which is comfortably above its 20D-SMA of 22078. It closed with a ‘Doji'(candlestick), indicating the indecision in the session.
The VIX spiked 6.5% to finish at 10.21, as volatility bounced a bit off ultra-low levels.
Near term support for the NDX is at 5850 and 5825. Near term resistance is at 5875 and 5909. Near term support for the SPX is at 2490- and 2482. Near term resistance is at 2500 and 2508.
Europe is mixed in early trade Tuesday, while U.S. Futures are slightly higher in the pre-market. Major economic reports on tap today include New Home Sales at 10:00am, Consumer Confidence at 10:00am, and the Richmond Fed at 10:00am as well.
The SPDR Dow Jones Industrial Average (SI:SPDR) ETF was unchanged in premarket trading Tuesday. Year-to-date, DIA has gained 14.50%, versus a 12.39% 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 75 ETFs in the Large Cap Value ETFs category.