Dow Jones Industrial Average Plunges As Rates Rise Again

Market technician Dave Chojnacki of Street One Financial examines Tuesday’s big market pullback and looks ahead to Wednesday’s session with a deep look at the underlying technicals for the major U.S. averages.

Good earnings reports got the market off to a bullish start on Tuesday. GOOG and CAT reported good numbers and their stocks opened higher. The euphoria didn’t last long, however, as the 10-Year Treasury Bote climbed towards 3%, and earnings guidance from the companies were not stellar.

The losses mounted as the 10YR. hit 3% and trade/tariff issues were expected to impact some major corporations. We noted the near term weakness in the last several Tech reports and as the averages broke key support levels the selling accelerated.

All three major indices ended the day with significant losses. At the close, the Dow Jones Industrial Average (Dow) fell 1.7%, the S&P 500 (SPX) gave up 1.3%, and the NDX declined 2.1%. Breadth was negative, 1.9 to 1, on above average volume. ROC(10)’s declined in the session, and crossed into negative territory.

RSI’s fell in the session and all three major averages moved to the lower 40’s. The SPX leads the group at 44.3. The Dow ended at 43.3 and the NDX at 42.4. All three major indices continue with their MACD above signal. The ARMS index ended the day at 0.90, a slightly bullish reading.

All in all, the major indices suffered their biggest loss this month. It pushed the DJIA and SPX into the red for the year. All three major averages fell below their 20D-SMA’s, as near term technicals weakened further.

The Dow closed at 24024, pushing through tis 20D-SMA of 24265. It remains below its 50D-SMA of 24609. The DJIA now sits within striking distance of its 200D-SMA (23660). The SPX closed at 2634. It moved right through its 20D-SMA of 2648. The SPX 200D-SMA is now at 2607 and provides the next critical level of support.

The NDX ended the day at 6509, as the FANG’s put pressure on the index. The NDX dropped below its 20D-SMA of 6594. It has critical support at 6344 (200D) and 6326. The VIX spiked 10.2% to finish at 18.02.

Near term support for the NDX is at 6500 and 6344. Near term resistance is at 6594 and 6650. Near term support for the SPX is at 2607 and 2588. Near term critical resistance is at 2648 and 2688.

Europe is significantly lower in early trade Wednesday, while U.S. Futures are pointing moderately lower in the premarket. The only major piece of economic news on tap today is the EIA Petro Report at 10:30am.

The SPDR Dow Jones Industrial Average ETF (DIA) fell $0.39 (-0.16%) in premarket trading Wednesday. Year-to-date, DIA has declined -2.95%, versus a -1.45% rise in the benchmark S&P 500 during the same period.

DIA currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #3 of 81 ETFs in the Large Cap Value ETFs category.