Where Does The Dow Jones Industrial Average Go From Here?

Technical analyst Dave Chojnacki of Street One Financial examines Tuesday’s anemic market action and updates the key technical levels to focus on for the major U.S. averages, as small cap weakness indicates weak market breadth.

Good Retail Sales numbers had the market opening higher on Tuesday, but that quickly reversed. Equities were unable to catch a bid, as the S&P 500 (SPX) struggled to get above its 20D-SMA.

The near term weakness in the market continued, as the averages traded sideways for most of the session. There was a decent amount of selling going on, as breadth was fairly negative.

The major averages ended slightly lower on the day, with volume waning and staying below average. At the close, the Dow Jones Industrial Average (DJIA) fell 5.2 points, the SPX inched down 1.2 points, and the NASDAQ 100 (NDX) slipped 0.44 of a point.

Breadth was negative, 1.8 to 1, on below average volume. ROC(10)’s declined, with the SPX the only index remaining in negative territory. RSI’s were nearly steady, with the DJIA continuing to lead with 62.3. The NDX and SPX are remain in the low to mid 50’s.

MACD’s remain below signal for all three major indices. The ARMS index ended the day at 0.86, a slightly bullish reading.

The major indices could not find a direction on Tuesday and traded in a very narrow range. Breadth was fairly negative, as indicated by an almost 1% loss in the small cap focused IWM (Russell 2000 ETF).

The NDX closed at 5907, barely holding its 20D-SMA which sits at 5905. It remains comfortably above its 50D-SMA of 5808. The near term weakness continues for the NDX and SPX. They both have seen their RSI’s declining since July 27.

The SPX was unable to close above its 20D-SMA of 2470. It traded as high as 2468, but closed at 2464. It does remain above its 50D-SMA of 2449. The DJIA remains the strongest of the three indices, closing just under 22000, at 21998.

The VIX fell 2.3% to finish at 12.04. After a spike in the index, it moves back to the usual ultra low volatility that is a true hallmark of the current investing era.

Near term support for the NDX is at 5905, 5900, and 5875. Near term resistance is at 5919 and 5925. Near term support for the SPX is at 2450, 2449 and 2425. Near term resistance is at and 2470 and 2480.

Europe is higher in early trade Wednesday, and U.S. Futures are pointing higher in the premarket. In terms of economic reports on tap today, we’ll see Housing Starts data at 8:30am, the EIA Report at 10:30am, and FOMC Minutes at 2:00pm.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $0.44 (+0.2%) in premarket trading Wednesday. Year-to-date, DIA has gained 12.74%, versus a 11.30% 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 #4 of 76 ETFs in the Large Cap Value ETFs category.