Market technician Dave Chojnacki of Street One Financial wraps up the trading week with a deep look at the underlying technicals for the major U.S. averages, which continue to post big reversals on a seemingly daily basis.
Equities opened higher on Thursday on good economic numbers and strong earnings by Facebook (NASDAQ:FB). Claims Numbers and Durable Goods reported better than expected as well.
The major averages moved higher through the day and only a small sell-off in the last hour left them off their highs. FB had a big day moving up 9% and dragging the beaten down FANG stocks with it. FNG (Advisor Shares New Tech and Media ETF) was up 2.78% on the day.
The major indices ended the day with significant gains. At the close, the Dow Jones Industrial Average (Dow) moved up 0.99%, the S&P 500 (SPX) added 1%, and the NASDAQ 100 (NDX) gained 2%. Breadth was decidedly positive, 2 to 1, on below average volume. ROC(10)’s were mixed with the Dow declining and the NDX and SPX advancing. The Dowand NDX remain in negative territory, while the SPX crossed back into positive territory.
RSI’s moved higher with the SPX leading at 49.9. The Dowended at 48.6 and the NDX at 49.4. The Dowand NDX had their MACD cross back above signal. The SPX remained above signal. The ARMS index ended the day at 1.06, reflecting the last hour weakness.
Thursday was a good snapback for the major indices, especially the beaten down NDX. Volume was again missing on an ‘up’ day, lending little conviction to the move. All three major indices remain below their 50% retrace levels: DJIA-25074, NDX-6760, SPX-2726.
The Dowended the session at 24322, crossing above its 20D-SMA of 24300. It remains below its 50D-SMA of 24592. The SPX closed at 2666. It moved above its 20D-SMA of 2652. The SPX remains below its 50D-SMA of 2688. The NDX ended at 6649, crossing above its 20D-SMA of 6603. It continues below its 50D-SMA of 6748. After the bell yesterday, AMZN and MSFT both beat earnings expectations. The VIX fell 8.9% to 16.24.
Near term support for the NDX is at 6603 and 6550. Near term resistance is at 6700, 6748 and 6760. Near term support for the SPX is at 2652 and 2600. Near term critical resistance is at 2688 and 2700.
Europe is mixed in early trading Friday, and U.S. Futures are also mixed in the premarket. Major economic reports to end the week include GDP at 8:30am, Employment Cost Index at 8:30am, and Consumer Sentiment at 10:00am.
The SPDR Dow Jones Industrial Average ETF (DIA) fell $0.33 (-0.14%) in premarket trading Friday. Year-to-date, DIA has declined -1.72%, versus a -0.21% 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 81 ETFs in the Large Cap Value ETFs category.