Technical analyst Dave Chojnacki of Street One Financial picks apart Wednesday’s lack of follow-through from the prior day’s rally and updates the important technical levels to focus on for the U.S. averages, as low volume and weak price action continue to define the late summer action.
Equities pushed lower at the open on Wednesday, as investors were spooked by comments the President made regarding the debt ceiling. New Home Sales came in lower than expected and contributed to the market moving lower.
Equities stayed in a narrow range on low volume, something that is becoming familiar. We got little movement in the PM till the final 15 minutes, when equities moved further to the downside. This left the major averages with small losses for the session.
At the close, the Dow Jones Industrial Average (DJIA) was down 0.4%, the S&P 500 (SPX) gave 0.35%, and the Nasdaq 100 (NDX) fell 0.37%. Breadth was slightly positive, 1.1 to 1, on below average volume. ROC(10)’s declined across all three major averages and remained in negative territory.
RSI’s slipped back somewhat with the DJIA the strongest at 50.4. The NDX ended at 49.8 and the SPX closed at 46.3. MACD’s remain below signal for all three major indices. The ARMS index ended the day at 0.81, a bullish reading.
The major indices gave up some of the prior session’s gains, but the DJIA and NDX held above their 50D-SMA’s of 21643 and 5812, respectively. All three major indices remain below their 20D-SMA’s : DJIA-21921, NDX-5876, SPX-2460.
The NDX closed at 5851, just 25 points below its 20D-SMA. It remains comfortably above its critical short term support level of 5597. The SPX remains the only index below its 50D-SMA of 2450. 2450 was also the level of the trend-line support.
The SPX needs to get back above that level and its 20D-SMA of 2460 to resume its upside bias. The SPX has critical short term support at 2405.
iShares Russell 2000 (NYSE:IWM) (Russell 2000 Small Cap ETF) remains below its 200D-SMA, while the VIX moved up 7.5% to 12.25.
Near term support for the NDX is at 5850 and 5825. Near term resistance is at 5875, 5876 and 5900. Near term support for the SPX is at 2437 and 2425. Near term resistance is at 2450 and 2460. Europe is slightly higher in early trade.
U.S. futures are pointing higher in the premarket Thursday. On the economic data front, today we’ll see Jobless Claims at 8:30am, Existing Home Sales at 10:00am, the Natural Gas Report at 10:30am, and today is also the Fed’s Jackson Hole Symposium.
The SPDR Dow Jones Industrial Average (SI:SPDR) ETF was unchanged in premarket trading Thursday. Year-to-date, DIA has gained 11.59%, versus a 10.42% 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 76 ETFs in the Large Cap Value ETFs category.