Market technician Dave Chojnacki of Street One Financial examines Monday’s bearish intraday reversal, which came amid rising volatility, and updates the important technical levels to focus on for the major U.S. averages.
The market got off to a good start on Monday, right from the opening bell. With no major economic reports, traders seemed to put trade fears to the side, and pushed equities to the upside.
Techs were leading the way, as they have lagged recently. By 2:00pm equities were up significantly, but then began to reverse and move to the downside. The major averages continued to fall in the last hour and gave up most of the early gains. It was a major reversal and some pundits were blaming it on an FBI raid of President Trump’s personal attorney’s office.
At the close, the Dow Jones Industrial Average (DJIA) added 46.3 points, the S&P 500 (SPX) gained 0.33%, and the Nasdaq 100 (NDX) was up 0.6%. Breadth was slightly negative, on below average volume. ROC(10)’s advanced in the session, with the DJIA and the SPX crossing into positive territory. The NDX remained in negative territory.
RSI’s inched higher, with the DJIA the strongest at 44.3. The NDX finished at 42 and the SPX at 43. The DJIA remained with its MACD above signal. The NDX and SPX continue with their MACD below signal. The ARMS index ended the day at 0.94, a nearly neutral reading. After a very strong early session, the major averages made a sudden reversal late afternoon.
With a VIX in the 20’s, this volatility can be expected. The VIX ended the session up 1.3% to 21.77.
The DJIA closed at 23979, above its 1-year trendline (23800) and its 10% correction level of 23955. The DJIA remains below its 20D-SMA of 24332. The SPX ended the day at 2613, one point over its 1-year trendline of 2612. It continues above its 200D-SMA of 2594. The SPX is also above its 10% correction level of 2587, although it’s below its 20D-SMA of 2670.
The NDX closed at 6472, above its 1-year trendline (6500) and its 10% correction level of 6418. It remains below its 20 and 50D-SMA’s.
Near term support for the NDX is at 6440 and 6418. Near term resistance is at 6500 and 6550. Near term support for the SPX is at 2612 and 2594. Near term resistance is at 2650 and 2670.
Europe is trending higher in early trade Tuesday, while U.S. Futures are significantly higher in the premarket. Major economic reports on tap today include PPI at 8:30am and Wholesale Trade at 10:00am.
The SPDR Dow Jones Industrial Average (SI:SPDR) rose $3.30 (+1.38%) in premarket trading Tuesday. Year-to-date, DIA has declined -3.09%, versus a -2.20% 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 80 ETFs in the Large Cap Value ETFs category.