Unexpected Calm Descends Upon Dow Jones Industrial Average

Market technician Dave Chojnacki of StreetOne Technical Analysis recaps Tuesday’s back-and-forth market action and previews Wednesday’s session with a deep dive into the underlying technicals for the major U.S. averages.

In a week with many events to impact markets, the first two sessions have been amazingly calm.  The US/North Korea summit ended with an agreement to proceed further and work on denuclearization.  Equities moved slightly higher at the open on a CPI number that came in at 2.8%. They moved higher through the morning hours before the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) began to reverse.  The Nasdaq 100 (NDX) continued higher until 2PM, when it briefly pulled back, but only to get a bump in the last hour.

A strong Tech sector helped the NDX to be the strongest index and hit a new intraday high of 7214.  The DJIA and SPX settled with very little change. After the bell on Tuesday, the Judge approved the AT&T/Time Warner deal. As we continue through our week of major events, we get the FOMC rate announcement today.           

At the close on Tuesday, the DJIA slipped 1.5 points, the SPX inched up 4.8 points, and the NDX moved up 0.57%.   Breadth was slightly negative, on weak volume. ROC(10)’s advanced, with all three major averages remaining in positive territory.   RSI’s were mixed, with the NDX continuing to lead at 69.5. The DJIA ended at 63.6 and SPX finished at 66. MACD’s remain above signal for all three averages.   The ARMS index ended the day at 0.85, a slightly bullish reading.

Despite the slow day on Tuesday, the NDX moved to a new intraday high of 7214.  It closed the day at 7209, just a point below its all-time closing high. It remains comfortably above its 20D-SMA of 7020, which will be critical near term support.  The DJIA closed at 25320, hardly changing in the session. It continues well above its 20D-SMA of 24862.

The SPX ended the day at 2786, finding resistance at the 2789 level.   The SPX continues above its 20D-SMA of 2737, which acts as near term support. The VIX finished at 12.34, falling just 0.01 of a point. Volatility continues relatively low.

Near term support for the NDX is at 7150 and 7100.  Near term resistance is at 7214 and 7250. Near term support for the SPX is at 2750 and 2737. Near term critical resistance is at 2788 and 2800.

Europe is slightly higher in early trade Wednesday, while U.S. Futures are slightly higher in the premarket. Major economic reports on tap today include PPI at 8:30am, EIA Oil report at 10:30am, and the FOMC Announcement at 2:00pm.

The SPDR Dow Jones Industrial Average ETF (DIA) rose $0.14 (+0.06%) in premarket trading Wednesday. Year-to-date, DIA has gained 3.30%, versus a 5.01% 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.


Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, David Chojnacki, does not endorse or recommend any issuer or security mentioned herein.

About the Author: Dave Chojnacki

Dave Chojnacki is the Chief Market Technician at StreetOne Technical Analysis. In addition, he is Portfolio Manager for Sabretooth Advisors.

Dave develops a morning newsletter providing clients a daily look at market technicals of the major indices and selected ETF’s. Market trends, support and resistance levels are provided in the daily letter. The Technical portion of the daily can also be found on Seeking Alpha. Mr. Chojnacki has been quoted in a number of industry publications including the Reuters, ETF Trends, Minyanville, Yahoo Financial and Investors.Com.

Prior to joining StreetOne Technical Analysis, Dave designed and developed I/T Systems for the Insurance and Financial Industries.

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