The market is confused and choppy. This can be seen by looking at the major indices, as most disagree with each other. This is important because when the overall market moves together, it makes trading easier as it allows traders to better time their entries based on pullbacks and breakouts.
On Wednesday, both the S&P 500 (SPY) and the Russell 2000 (IWM) moved up towards resistance from recent highs. On the other hand, the Dow Jones (DIA) cleared all-time highs.
Meanwhile, the Nasdaq 100 (QQQ) has yet to rally back over its 50-day moving average at $320.26. It should be noted that the Nasdaq has many big tech holdings, which have struggled at their current prices. Hence the lagging performance of the QQQs.
With that said, the next big question is, now that the House passed the next stimulus plan, will the remaining indices follow the DIA upward, or will they continue to move at their own pace?
Another concern is rising inflation, which the Fed brushed off with its Core CPI report beating estimates. If inflation is kept low along with bond yields, investors and the market will stay happy. However, the market may have its own theory of rising inflation, as one downside to the CPI report is that it does not include food and energy due to their increased volatility.
For now, if the market moves higher, we can take the Fed's word on inflation and watch for key resistance in the IWM and SPY, along with the QQQ's 50-DMA to break. And if the market cannot decide where to go, expect more choppy days ahead.
- S&P 500 (SPY): 392-394 resistance area
- Russell 2000 (IWM): Lots of resistance from 224-230
- Dow (DIA): 320 should be new support
- Nasdaq (QQQ): Main resistance 320 the 50-DMA
- KRE (Regional Banks): 70.16 high to clear
- SMH (Semiconductors): 216 support. 235.62 resistance
- IYT (Transportation): 240 new support. 246.83 to clear
- IBB (Biotechnology): Main support the 200-DMA at 143.31; resistance 154.13
Mish Schneider
MarketGauge.com
Director of Trading Research and Education
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
