More Weakness Ahead For Dow Jones Industrial Average?

Market technician Dave Chojnacki of StreetOne Technical Analysis examines Tuesday’s market pullback and updates the important technical levels to watch for the major U.S. averages.

Equities opened slightly higher on Tuesday with no economic news to move the market. The prior session’s rally was a relief from trade pressures and the major indices attempted to continue with the rally.

The positive movement only lasted about an hour until the major averages began to reverse. The major indices then spent most of the session going sideways, until the last hour when they sold off into the close. Micron (MU) was one of the outstanding issues in the session, as they announced a $10 Billion buyback. MU finished up 6.45% in the session. All three major indices ended the day slightly lower with the Dow Jones Industrial Average (DJIA) the biggest loser.

At the close, the DJIA fell 0.72%, the S&P 500 (SPX) lost 0.3%, and the Nasdaq 100 (NDX) gave up 0.17%. Breadth was negative, 1.6 to 1, on below average volume. ROC(10)’s declined in the session, however, all three major indices remained in positive territory.

RSI’s moved a little lower, with the SPX now the strongest at 58. The DJIA is now at 56.9 and the NDX at 56.7. All three major averages continue with their MACD above signal. The ARMS index ended the day at 1.00, a neutral reading at the close.

We continue to look at the 50% retrace level to give us an indication as to where this market is going. The NDX continues above this level, which is 6760. The DJIA has been unable to cross above its 50% level of 25074. The SPX moved above its 50% level of 2726 on Monday, but closed just below on Tuesday with a close of 2724. All three major indices developed an “Engulfing Bearish” candlestick in the session, suggesting more weakness.

The DJIA closed at 24834, continuing to hold above its 20D-SMA of 24478. The SPX closed at 2724, just below the noted 50% level of 272612. The SPX remains above its 20D-SMA of 2687. The NDX ended 6893, continuing above its 50% retrace level of 6760. It remains above its 20D-SMA of 6798 and its 50D-SMA of 6730. The VIX added 1% to finish at 13.22.

Near term support for the NDX is at 6850 and 6798. Near term resistance is at 6900 and 7000. Near term support for the SPX is at 2700 and 2687. Near term critical resistance is at 2726 and 2750.

Europe is significantly lower in early trade Wednesday, and U.S. Futures are significantly lower in the premarket. Major economic reports on tap today include New Home Sales at 10:00am, the EIA Oil report at 10:30am, and FOMC Minutes at 2:00pm.

The SPDR Dow Jones Industrial Average (NYSE:DIA) fell $1.73 (-0.70%) in premarket trading Wednesday. Year-to-date, DIA has gained 0.32%, versus a 2.15% 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.