Three of the four major indices, including the S&P 500 (SPY), Nasdaq 100 (QQQ) and the Dow Jones (DIA), inched to new highs, while the Russell 2000 (IWM) is struggling in its current price range. It is important for IWM to keep pace with the other indices, for it shows a large selection of small-cap companies which tend to better reflect the overall market picture. This is especially true throughout the pandemic, which has seen smaller businesses struggle more while larger time-tested businesses had the capital to weather the pandemic. Additionally, if IWM continues to chop within its current price area, we could be seeing a divergence between large-cap and small-cap companies.
Above is a chart of the 4 major indices with our proprietary Real Motion indicator. The recent rally to new highs has pushed SPY and QQQ close to their 200-period moving average (green line) while IWM has yet to clear over its 50-PMA (blue line). One interesting thing to note is how the DIA cleared to new highs along with QQQ and SPY in price, but has yet to clear over its 50-PMA like IWM. This could be showing that this recent push to new highs is losing momentum.
With that said, if the other major indices continue upwards without IWM, this could show there's an underlying problem in the market, and we should be cautious. Especially so if IWM cannot clear its 50-PMA on Real Motion.
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On the latest edition of StockCharts TV's Mish's Market Minute, Mish, continuing from the previous video, talks about consumer staples and consumer discretionary by following up on some stocks she presented last week, as well as offering some new choices. Consumer Staples can include things that we need no matter what (food and beverages) and Consumer Discretionary includes things that we could give up if necessary (leisure and entertainment).
ETF Summary
- S&P 500 (SPY): New all-time highs.
- Russell 2000 (IWM): Like this to hold over 216.91.
- Dow (DIA): 351.09 resistance cleared. Watching to hold it.
- Nasdaq (QQQ): New highs but lower average volume.
- KRE (Regional Banks): Holding downward trend. Needs to break the 10-DMA at 62.27 for 2 consecutive days.
- SMH (Semiconductors): Holding over the 10-DMA at 254.14.
- IYT (Transportation): Minor support the 10-DMA at 255.47.
- IBB (Biotechnology): 157.11 main support area.
- XRT (Retail): 94.84 support the 50-DMA.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
