Technical analyst Dave Chojnacki of Street One Financial recaps Tuesday’s negative session for equities and updates the major underlying technical indicators for the U.S. averages that are suddenly shifting bearish after many days of gains for tech stocks.
Prior to the opening on Tuesday, the CPI number came in as expected and the major indices opened to the upside. This didn’t last very long, however, as equities began to move to the downside.
By late morning, the averages were trading in negative territory and continuing to fall. The Treasury funding had gone well and the 10-Year Treasury Note yield was moving lower, finishing at 2.85%. Equities tried to bounce in the early afternoon, but only fell back and headed lower.
The Nasdaq 100 (NDX) was the biggest loser in the session, and ended its streak of seven straight sessions to the upside. When the final bell rung, the major indices had moderate to significant losses. At the close, the Dow Jones Industrial Average (DJIA) fell 0.68%, the S&P 500 (SPX) was down 0.64%, and the NDX was off 1.1%. Breadth was negative, 1.5 to 1, on above average volume. ROC(10)’s advanced in the session, with the DJIA the only index in negative territory.
RSI’s fell in the session, with the NDX dropping to 60.5. The DJIA and SPX inched lower to 49 and 55.2, respectively. All three major indices remain with their MACD above signal. The ARMS index ended the day at 1.43, s fairly bearish reading.
The reversal on Tuesday was somewhat of a surprise for the DJIA and SPX. The NDX was becoming a little stretched, and a consolidation would have been expected. The concern in yesterday’s session was the large “Bearish” candle and the increase in volume.
The NDX closed at 7046, managing to hold above the 7022 and 7000 levels of support. Its 20D-SMA area of support is way down at 6863. The DJIA finished at 25007, continuing below its 50D-SMA of 25307 and moving below its 20D-SMA of 25013. It has critical resistance at 25800. The SPX closed at 2765, 20 points above its 50D-SMA of 2745. It remains slightly above the 61% Fibonacci level of 2760.
The VIX added just 3.6% to finish at 16.35.
Near term support for the NDX is at 7022 and 7000. Near term resistance is at 7100 and 7124. Near term support for the SPX is at 2750 and 2743. Near term resistance is at 2775 and 2800.
Europe is trading slightly higher in early trade, and U.S. Futures are pointing higher in the premarket. Major economic reports on tap today include PPI at 8:30am, Retail Sales at 8:30am, Business Inventories at 10:00am, and the EIA report at 10:30am.
The SPDR Dow Jones Industrial Average (SI:SPDR) rose $1.22 (+0.49%) in premarket trading Wednesday. Year-to-date, DIA has gained 1.15%, versus a 3.69% 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 80 ETFs in the Large Cap Value ETFs category.