Weak Energy Sector Still Weighing On Dow Jones Industrial Average

Market technician Dave Chojnacki of Street One Financial examines Wednesday’s continued bounce in U.S. equities and updates the important technical levels to focus on as we wrap up a very eventful month of August for the markets.

Good economic numbers propelled equities early in the session on Wednesday, as ADP Employment data was better than forecast, and GDP came in at +3%. Investors were pleased with these numbers and pushed the averages higher.

Techs and Biotechs were in favor, and helped push the NASDAQ 100 (NDX) to significant gains. It was the fourth straight day of gains for the S&P 500 (SPX), as it ended with moderate gains. Energy issues were weak again, however, restraining the Dow Jones Industrial Average (DJIA) gains.

At the close, the DJIA gained 27 points, the SPX added 0.46%, and the NDX spiking 1.2%. Breadth was positive, 1.4 to 1, on below average volume. ROC(10)’s advanced, with the NDX moving into positive territory. The DJIA and SPX remain in negative territory.

RSI’s moved higher with the NDX taking over the lead at 58.7. The SPX and DJIA are in the low to mid 50’s. The NDX MACD crossed above signal, while the DJIA and SPX remain below. The ARMS index ended the day at 1.36, a slightly bearish reading.

It was a good day for equities, as several technical indicators improved. The NDX had the strongest day, moving above its 20D-SMA of 5865. It also was challenging its all-time closing high, which sits at 5950. It traded as high as 5940 and closed at 5932. Its ROC(10) and MACD also moved into favorable technical levels.

The DJIA closed at 21892, just 12 points below its 20D-SMA of 21904. The SPX closed above its 20D-SMA (2453) and 50D-SMA (2451). It also closed right at its Trend-Line of 2457. A move above this level sets it up to challenge its all-time closing high of 2480.

In summary, Wednesday’s session sets the near term bias to positive. IWM (Russell 2000) continued to move above its 200D. GLD (NYSE:GLD) (SPDR Gold) was off slightly on the day, and closed at 124.36, while the VIX was down 4.1% to 11.22.

Near term support for the NDX is at 5925 and 5900. Near term resistance is at 5950 and 5975. Near term support for the SPX is at 2453-2450 and 2437. Near term resistance is at 2462 and 2475.

Europe is higher in early trade Thursday, and U.S. Futures are pointing higher in the premarket as well. Major economic reports on tap today include Jobless Claims at 8:30am, Personal Income at 8:30am, Chicago PMI at 9:45am, Pending Home Sales at 10:00am, and the Natural Gas Report at 10:30am.

The SPDR Dow Jones Industrial Average (SI:SPDR) ETF (NYSE:DIA) was unchanged in premarket trading Thursday. Year-to-date, DIA has gained 12.11%, versus a 11.07% 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.