Yesterday, we were watching the VXX to gauge fear in the market. Today, it gapped higher and then continued to sell off while the indices gapped lower and began to rise.
Now the QQQs, DIA and SPY, while selling off from the highs, had some end-of-day buying comeback, which pushed them higher while the VXX sank further.
One bearish sign is that today the SPY did not fill the gap. To close it, the SPY would need to have traded past yesterday's low of 338.52. It only traded up to 337.70.
While this is not enough to give us any clear bias, we do have an obvious break in the QQQs, which could be more convincing.
Once again, let's check back to our outliers LQD and JNK, to give us a better idea of what is happening. LQD did not break yesterday's low and closed basically unchanged.
While LQD didn't give us any major decisive action, JNK, on the other hand, had a green day, closing over both the 50- and 10-DMAs.
This is telling me that, while pieces of the puzzle could potentially break down, we still have underlying support in the market. By whom? Well the Fed of course, and they will continue to help as much as they can, especially with the ever-nearing election.
We can also note that the QQQs closed above the September 11th low of and its recent break in the 50-DMA at 266.90.
Tomorrow, we can then look for a break of that low and a confirmation into a caution phase or a potential rally back to the 50-DMA and above. If neither of those happen, I would look for it to begin building support in the current trading range.
With the market at an inflection point, keep these levels in mind for tomorrow so our trading decisions have us on the right side of the market.
- S&P 500 (SPY): New support 333, resistance 338
- Russell 2000 (IWM): 151 50-DMA support, resistance 156
- Dow (DIA): 280 pivotal support, 285 resistance
- Nasdaq (QQQ): Major support 260-267, resistance 274-275
- KRE (Regional Banks): Needs to hold 36 support. Looking for a move over 50 and 10-DMA
- SMH (Semiconductors): Broke but close over 50-DMA 164 support. 169 pivotal
- IYT (Transportation): 200 key support
- IBB (Biotechnology): Needs to close back over 50-DMA
- XRT (Retail): 49.30 the 50-DMA is key support
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
