Market technician Dave Chojnacki of Street One Financial recaps Monday’s positive start to the fourth quarter, which came despite the deadliest mass shooting in U.S. history, and updates the important technical levels to focus on throughout the rest of the week.
While the country woke up to a sad tragedy on Monday, the market shrugged off the news to buy stocks to start the fourth quarter. The good opening wasn’t across the board, as the Nasdaq 100 (NDX) lagged early. Once again, big tech stocks were not the favorite.
Instead, investors were buying Materials and Industrials, pushing the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) to new highs. It was the third straight closing high for the SPX, in fact.
The DJIA’s moderate gain pushed its RSI into a slightly overbought level. The SPX finished with a small gain, while the NDX inched up by a few points. At the close, the DJIA was 0.68%, the SPX gained 0.39%, and the NDX added 2.6 points. Breadth was positive, 1.8 to 1, on below average volume.
ROC(10)’s advanced in the session, with the NDX moving back into positive territory, joining the DJIA and SPX. RSI’s ended higher, with the DJIA now the strongest at 73.5. It is moving into overbought territory. The NDX is now at 56.6 and the SPX at 72. The NDX remains as the only major index with its MACD below signal. The ARMS index ended the day at 0.90, slightly bullish.
The DJIA and SPX moved to new highs on Monday, though the volume did not lend conviction to the move. While big Techs were not as strong, investors seem to continue rotating into small caps. IWM (iShares Russell 2000) made its 7th straight closing high at 150.00. Small caps would be the biggest beneficiaries of a new Tax Plan, so it makes sense that investors have been targeting them in recent sessions.
The DJIA closed at 22557, moving further from its 20D-SMA of 22201. The NDX closed at 5981, just slightly above its 20D-SMA of 5954. The SPX closed at 2529, just 3 points below its top Bollinger Band® of 2532. Its 20D-SMA is at 2495. It also continues above its 9 month trend-line of 2498.
The VIX fell 0.06 of a point to 9.45, with volatility near all-time lows.
Near term support for the NDX is at 5975 and 5954. Near term resistance is at 5988 and 6004. Near term support for the SPX is at 2525 and 2512. Near term resistance is at 2537 and 2550.
Europe is mixed to slightly lower in early trade Tuesday, while U.S. Futures are slightly higher in the premarket. There are no major economic reports on tap today.
The SPDR Dow Jones Industrial Average (SI:SPDR) ETF rose $0.66 (+0.29%) in premarket trading Tuesday. Year-to-date, DIA has gained 15.75%, versus a 13.92% 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.