On Wednesday, investors waited for the FOMC minutes release at 2 PM EST to see whether the Fed would be hawkish or dovish in its response to the recent Producer Price Index report (PPI). With the PPI showing inflation rising rapidly, the market gapped lower Tuesday on an expectation that the Fed would be forced to step in and decrease inflation. Typically, the Fed uses tools such as raising interest rates to offset increasing inflation.
However, Wednesday's FOMC minutes came in neutral, showing that the Fed isn't looking to upset the market, but is still concerned. So far, the Fed has decided to keep rates near zero, but has agreed to reduce bond-buying by $30 billion per month.
Having said that, now the 4 major indices have rallied, with the S&P 500 (SPY), the Nasdaq 100 (QQQ) and the Dow Jones (DIA) rallying back into resistance from the last weeks' highs, while the Russell 2000 (IWM) closed over recent lows. With a potential gap up tomorrow, these are the levels to clear or hold over if we expect the market to continue higher:
- SPY $470.65
- QQQ $401.99
- DIA $360.33
When it comes to IWM, there is no main resistance level to clear, as it's been rangebound for most of 2021. Instead, watch for IWM to stay over its support area around $214. If the initial market reaction from the FOMC is sustainable, watch for these key price levels to clear or hold over.
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ETF Summary
- S&P 500 (SPY): Needs to clear 470.65.
- Russell 2000 (IWM): 214.22 support area to hold.
- Dow (DIA): 360.33 to clear.
- Nasdaq (QQQ): 401.19 to clear.
- KRE (Regional Banks): 67.95 200-Day moving average support.
- SMH (Semiconductors): 318.82 high to clear.
- IYT (Transportation): 267.63 needs to clear.
- IBB (Biotechnology): Watching for a second close over the 10-DMA at 149.52.
- XRT (Retail): Like this to stay over 88.75.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
