Market technician Dave Chojnacki of Street One Financial recaps Monday’s bearish market action, which came amid renewed skepticism for tech firms over privacy concerns, and updates the important technical levels to focus on for the major U.S. averages.
Equities gapped lower at the open on Monday, as Facebook (NASDAQ:FB) was getting slammed for misuse of data it collects. There was also concern among Techs, regarding technology and software piracy. Should Washington get tough on this, what may be the impact or backlash from overseas.
The major averages fell heavily through the morning and into the early afternoon hours. The major indices found support in the early PM and then finished off their lows, when the final bell rang. At the close, the Dow Jones Industrial Average (DJIA) lost 1.3%, the S&P 500 (SPX) fell 1.4%, and the Nasdaq 100 (NDX) moving down 2.2%. Breadth was decidedly negative, 3.6 to 1, on above average volume. ROC(10)’s declined in the session, with all three major averages falling into negative territory.
RSI’s fell in the session, with the NDX falling to 48.5. It remains the strongest. The DJIA fell to 43.5 and the SPX slipped to 45.8. The DJIA and NDX had their MACD fall below signal. The SPX remains the only index with its MACD above signal. The ARMS index ended the day at 1.89, a very bearish reading.
We have been noting the near term weakness in the DJIA and SPX, but on Monday the action in FB left the NDX near term being challenged. The NDX was the biggest loser in the session and the FANG stocks were hit hard. FB lost 6.7% in the session. Recall that just last Monday, the NDX was hitting new highs.
It fell below its 20D-SMA of 6921, but still holds its 50D-SMA of 6815. Critical near term support is at 6645. The DJIA closed at 24610, remaining below its 50D-SMA of 25300. It has critical near term support at 24127. The SPX closed at 2712, below its 20 and 50D-SMA’s of 2734 and 2748, respectively. It fell below its 50% retrace level of 2726. Near term critical support is now at 2647.
The VIX spiked 20.3% on the day to finish at 19.02. It had reached as high as 21.87 in the session, a multi-week high.
Near term support for the NDX is at 6850 and 6815. Near term resistance is at 7000 and 7050. Near term support for the SPX is at 2700 and 2675. Near term resistance is at 2734 and 2748.
Europe is trading higher in early trade Tuesday, while U.S. Futures are slightly higher in the premarket. There are no major economic reports on tap for today.
The SPDR Dow Jones Industrial Average (SI:SPDR) ETF rose $0.92 (+0.37%) in premarket trading Tuesday. Year-to-date, DIA has declined -0.59%, versus a 1.36% 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 80 ETFs in the Large Cap Value ETFs category.