With a stock market gap up on Tuesday, many traders scrambled to re-enter as they grappled with FOMO (fear of missing out). Additionally, the market is reaching a pivotal point as traders who piled in wait for a breakout towards highs.
Looking at large-cap and big-tech indices, the S&P 500 (SPY) and the Nasdaq 100 (QQQ), have both consolidated over the past 4 trading days. Now, we are watching for each to clear new highs or break under the past Tuesday's low.
As seen in the above daily chart, each index looks poised to break resistance levels dating back to early November: $470.90 for the SPY and $401.19 for the QQQ. However, the Small-Cap index, the Russell 2000 (IWM), could be painting a different picture compared to SPY and QQQ.
The battle of small caps vs. big caps continues, with large companies beating the little guys throughout the year. Additionally, IWM's weakness has become concerning, especially if it heads towards the bottom of its range.
Though the large cap indices -- SPY, QQQ and DIA -- are sitting near highs, we should not ignore a potential big divergence if IWM breaks under the lows of its yearly range around $208. Therefore, we should keep an open mind of the market's upside potential, but also know that, if IWM continues to sideline or begin to trend under $208, this could be a signal for weakness in the overall market.
Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.
On this week's edition of StockCharts TV's Mish's Market Minute, Mish gives you an overview of her favorite chart patterns that you can use to help you trade. She reviews flags, gaps, consolidation and wedges, just to name a few. This is an episode you'll want to revisit many times.
ETF Summary
- S&P 500 (SPY): 473.54 high to clear.
- Russell 2000 (IWM): Watching to hold the 10-DMA at 219.72.
- Dow (DIA): 354.02 support. 365.64 highs to clear.
- Nasdaq (QQQ): 401.19 to clear.
- KRE (Regional Banks): Trying to hold the 10-DMA at 70.52.
- SMH (Semiconductors): In a choppy zone.
- IYT (Transportation): 274 to clear.
- IBB (Biotechnology): 153.38 resistance.
- XRT (Retail) 95.72 50-DMA to clear.143.25 minor support.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
