Market technician Dave Chojnacki of Street One Financial examines Tuesday’s mixed session that saw equities surge to new highs only to close in the red, and updates the important technical levels to watch as a healthy pullback could be looming on the horizon.
After the long holiday weekend, equities came roaring out of the gate on Tuesday morning. The 2018 rally continued through the AM, as all three major indices made new highs. Once again the VIX was diverging from equities, as we noted this in the last two sessions. This was a precursor of the major averages reversing direction in the PM.
After significant early gains, the market made a major reversal and finished with small losses. At the close, the Dow Jones Industrial Average (DJIA) lost 10.3 points, the S&P 500 (SPX) fell 9.8 points, and the Nasdaq 100 (NDX) gave up 0.32%. Breadth was decidedly negative, 2 to 1, on above average volume. ROC(10)’s moved higher, despite the losses, and remained in positive territory.
RSI’s moved slightly lower, but all three major indices remain in overbought territory. The DJIA continues to lead at 85.4, the SPX at 77.6, and the NDX at 73.9. All three MACD’s continue above signal. The ARMS index ended at 0.98, a neutral reading. All three major indices made new record intraday highs, hitting new milestones.
The DJIA traded as high as 26086, above the 26000 level for the first time. The SPX hit above 2800 for the first time, trading at 2807. The NDX traded at 6835, above 6800 for the first time.
The DJIA closed at 25792, above its upper Bollinger Band® of 25776. Its 20D-SMA is now at 25043, providing the first line of support. The SPX closed at 2776, after hitting 2807. We noted last week that we saw 2800 as a possible near term target. A pullback or consolidation at this level would be healthy. It closed just below its upper Bollinger band of 2787. Its 20D-SMA is now at 2713.
The NDX closed at 6737, with its 20D-SMA at 6556. The VIX spiked 14.7% to finish at 11.66. It is the third session in a row the VIX moved higher. Near term support for the NDX is at 6700 and 6675. Near term resistance is at 6782 and 6800. Near term support for the SPX is at 2762 and 2750. Near term resistance is at 2787 and 2800.
Europe is mixed in early trade Wednesday, while U.S. Futures are significantly higher in the pre-market. Major economic reports on tap for today include Industrial Production at 9:15am, Housing Market Index at 10:00am, and the Fed Beige Book at 2:00pm.
The SPDR Dow Jones Industrial Average ETF (DIA) rose $1.87 (+0.73%) in premarket trading Wednesday. Year-to-date, DIA has gained 4.22%, versus a 3.79% rise in the benchmark S&P 500 index during the same period.
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 Street One Financial. He provides technical support for the Street One team and also develops individual analysis for Clients as requested.
Dave is a major contributor to the ‘ETF Daily’, 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.
In addition, Dave assists with desk trading when necessary. He possesses a Series 7 and 63.
Prior to joining Street One, Dave designed and developed I/T Systems for the Insurance and Financial Industries.