The week started with a large rally and is now ending with the Nasdaq 100 (QQQ) and the S&P 500 (SPY) at all-time highs.
Though the Dow Jones (DIA) is not far behind, the small-cap index Russell 2000 (IWM) struggles in the middle of its trading range. The above chart shows how IWM has been stuck within a range for the past 6 months. Unable to break to new highs, IWM has had many weeks of choppy price action. Though we should continue to watch for strength in the major indices, we should also be hesitant if IWM continues to flounder within the middle of its range.
Right now, IWM needs to play catchup, and, if that doesn't happen, it could show a disconnect in the market signaling potential choppy price action is head.
Another space we keep our eyes on is the transportation sector (IYT). With the rise in COVID cases, supply chain disruptions continue to throttle trade across the world. That is where IYT helps us gauge how the movement of goods could affect the market.
With that said, the recent rally has brought IYT back over its 10-day moving average at $255.53 and back into the prior week's trading range. Along with IWM, it will need to hold its recent price area. Over $251.78 for IYT and over $216.91 for IWM.
These price levels should act at minor support levels throughout the next week.
The current price action leads us to believe the market is ready for another push higher; however, stay cautious if IWM and IYT break these key price levels.
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On this week's edition of StockCharts TV's Mish's Market Minute, Mish, continuing from last week's 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.
- Nasdaq (QQQ): New highs.
- KRE (Regional Banks): Holding downward trend. Needs to break the 10-DMA at 62.52 for 2 consecutive days.
- SMH (Semiconductors): Watch this to clear and hold over 258.60.
- IYT (Transportation): Minor support the 10-DMA at 255.52.
- IBB (Biotechnology): Needs to hold over 165.79.
- XRT (Retail): 94.70 support the 50-DMA.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
