On Sunday, we concluded that if most of the major indices could clear to new highs, along with the Russell 2000 (IWM) breaking out of resistance from $226.69, the market had the potential to make a powerful move up. However, while none of the indices broke out to new highs Monday, IWM was able to clear its pivotal resistance level at $226.69. This is important because IWM has been lagging for most of April, while the Nasdaq 100 (QQQ), Dow Jones (DIA) and S&P 500 (SPY) were able to break to new highs and are currently holding near them.
A continued rotation back into the small caps would be a healthy shift for the market; especially if the other indices hold their current price levels. Next, we can watch for IWM to head back to new highs at $234.53.
To add more depth to the current market picture, key sectors, like biotech (IBB) and semiconductors (SMH), were able to clear or hold over pivotal areas. SMH made a break back through its 10-Day moving average and IBB had a second daily close over its 50-DMA. This confirmed a bullish phase change. However, if the major indices cannot clear to new highs, we have 3 main price levels to watch for.
- SMH: To hold over its 10-DMA at $249.28.
- IWM: To stay over $226.69 as a new support level.
- IBB: To stay over the 50-DMA at $154.42.
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- S&P 500 (SPY): Doji day. Holding near highs
- Russell 2000 (IWM): 234.53 high to clear
- Dow (DIA): 342.43 high to clear
- Nasdaq (QQQ): 342.23 high to clear
- KRE (Regional Banks): Doji day. Support 66.68
- SMH (Semiconductors): 258.59 resistance
- IYT (Transportation): 262.85 the 10-DMA
- IBB (Biotechnology): Confirmed bullish phase change over the 50-DMA at 154.42
- XRT (Retail): Like this to hold over the 10-DMA at 91.86
Assistant Director of Trading Research and Education