Technical analyst Dave Chojnacki of Street One Financial examines Wednesday’s sudden market decline, which put a damper on the underlying technical indicators than had been steadily improving since the markets started bouncing off their lows in mid-February.
Weak economic reports set the stage for Wednesday’s session, as investors interpreted this as good news for delaying rate increases. The major indices got off to a good start, rebounding from the prior session’s losses. The 10-Year Treasury Note was moving lower through the session and ended at 2.87%, giving further impetus to equities.
Going into the last hour of trading equities began to sell-off, however, continued to give up all their gains and moved into the red. The major averages ended with significant losses and at their lows of the day. At the close, the Dow Jones Industrial Average was down 1.5%, the S&P 500 gave up 1.1%, and the NASDAQ 100 fell 0.67%. Breadth was decidedly negative, 2.6 to 1, on average volume. ROC(10)’s declined in the session for all three major indices, but they remained in positive territory.
RSI’s moved lower, with the Dow and SPX moving into the upper 40’s. The NDX remains the strongest at 55.4. The major indices remain with their MACD’s above signal. The ARMS index ended the day at 1.75, a bearish reading. The major indices made a major reversal near the end of the session and moved back below some key near term technicals.
The concern recently has been that on positive days the volume has been below average, not lending conviction to rallies. Yesterday’s late pullback pushed the Dow and SPX back below their 50% retrace levels of 25238 and 2726, respectively. The Dow closed at 25029, falling below its 20D-SMA and 50D-SMA’s of 25039 and 25281, respectively.
The NDX ended the day at 6854, holding above its 20D-SMA of 6716. We will watch its 50% retrace 6664 for important support. The SPX closed at 2713, just holding above its 20D-SMA of 2711.
The VIX added 6.7% to finish at 19.85, as volatility perks back up again.
Near term support for the NDX is at 6850 and 6800. Near term resistance is at 6900 and 6950. Near term support for the SPX is at 2711 and 2700. Near term resistance is at 2725 and 2736.
Europe is significantly lower in early trade Thursday, while U.S. Futures are pointing lower in the premarket. We’ll see a slew of major economic reports released today, including Jobless Claims at 8:30am, Personal Income at 8:30am, PMI at 9:45am, ISM at 10:00am, Construction Spending at 10:00am, and EIA NatGas at 10:30am.
The SPDR Dow Jones Industrial Average (NYSE:DIA) fell $0.80 (-0.32%) in premarket trading Thursday. Year-to-date, DIA has gained 1.14%, versus a 1.79% 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.