For the small-cap Russell 2000 (IWM), $226.69 is an important level to hold, as it shows the index can sustain itself over its main consolidation range dating back to early April. On the other hand, the Transportation sector (IYT), along with Retail (XRT), are not far from their 50-day moving average. This shows a potential divergence in the market, should IYT and XRT decide to break their major moving average while the small-cap index holds or push higher.
Because IYT acts as an indicator for the underlying movement of goods, we can watch it for early warning signs that the market momentum is waning or speeding up. However, with another 559,000 jobs added in May compared to the 278,000 in April, the economy could see an increase in demand for goods. Furthermore, from the fundamental side, this could lead us to think that transportation might have another surge of support as we head into the second half of the year.
From the technical side, price action is always king, and therefore we should watch for the $226 area to hold in IWM as well the 50-DMA to hold for both IYT and XRT.
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Mish Schneider reviews $SPY, $IWM and $IYT, plus 20 actionable picks from various sectors to watch should the stock market hold up, in this week's edition of StockCharts TV's Mish's Market Minute (watch below).
ETF Summary
- S&P 500 (SPY): Resistance 422.82 to clear.
- Russell 2000 (IWM): 226.69 support area.
- Dow (DIA): 348.65 then 351 high to clear.
- Nasdaq (QQQ): Next resistance 336.65 with 331 support.
- KRE (Regional Banks): Holding 70.00 with 71.82 resistance.
- SMH (Semiconductors): 244 support.
- IYT (Transportation): 267.65 the 50-DMA.
- IBB (Biotechnology): 154 next resistance area.
- XRT (Retail): 96.16 resistance.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
