Inflation pressures take the media's focus this week. Nevertheless, we must remember the news does not always align with market price.
With that said, prices are holding near highs in the major indices. This is a positive sign as investors are looking for a continuation in trend or consolidation. However, lower amounts of volume paired with smaller daily ranges in the above chart's point to more consolidation.
Looking at the S&P 500 (SPY), Nasdaq 100 (QQQ), Dow Jones (DIA) and the Russell 2000 (IWM), each sits within its prior days' range. If the market makes a small break from the highs, we can look at the last couple of days' lows as minor support levels to bounce from. These support levels are also shown as black lines on the above charts. Using these lows as reference areas, we can watch them as potential buy entries if the market begins to bounce.
Additionally, using bonds as a risk on or off indicator — High-Yield Corporate Bonds ETF (JNK) has pulled back towards its 200-day moving average, while the 20+ Year Treasury bonds TLT is holding above recent price action and over its 50-DMA.
With long-term bonds showing strength and JNK pulling back towards support, this further points to market hesitancy. Nonetheless, if a small pullback forms, the media will likely point towards inflation as a key pressure; however, we will be one step ahead, knowing that the technical analysis has already given us a partial warning.
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- S&P 500 (SPY): 466.92 minor support.
- Russell 2000 (IWM): 237-240 support area.
- Dow (DIA): 359.87-361.89 support area.
- Nasdaq (QQQ): 393.92 minor support.
- KRE (Regional Banks): 72.90 support area.
- SMH (Semiconductors): 294 minor support.
- IYT (Transportation): 273.76 support the 10-DMA.
- IBB (Biotechnology): Inside day.
- XRT (Retail): 100 minor support.
Assistant Director of Trading Research and Education