This week has been a wild ride from new highs, followed by a quick pullback towards support in certain indices. High Yield Corporate Debt ETF (JNK), which we use as a risk-on or -off indicator, has broken under minor support from $107.33. To make things even more confusing, the fear/volatility index (VXX) closed negative and one cent over its 10-day moving average at $18.82.
Given these mixed signals, the question remains if the market will hold or break lower Monday morning. Though only Monday holds the decisive answer, we should continue to watch the major indices' pivotal price levels.
So far, the Nasdaq 100 (QQQ) is the most at risk for breaking the low of its range at $377. This is such an obvious support level that breaking it could easily create a drop towards the QQQ's 200-DMA at $363. However, the other indices, including the Russell 2000 (IWM), Dow Jones (DIA) and S&P 500 (SPY), have further room before hitting support and, if they hold, could prop up the tech-heavy index.
The chart below shows support levels drawn in black lines. In the case of the DIA, its immediate support area comes from the 50-DMA (blue line) at $358.30.
With that said, looking at Mish's Economic Modern Family, the Transportation (IYT) and Regional Banking (KRE) sectors remain the leaders through this volatile week. Even with bank earnings coming, their relative strength compared to the overall market make them important areas to watch for trade ideas come Monday morning.
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ETF Summary
- S&P 500 (SPY): Like to see this close over the 50-DMA on Monday over 466.34.
- Russell 2000 (IWM): Next main support 208 area.
- Dow (DIA): The 50-DMA is close, but it's not a key support area at 58.30. Like it to hold Fridays low at 361.13.
- Nasdaq (QQQ): 377.37 support.
- KRE (Regional Banks): New highs.
- SMH (Semiconductors): Main support 288.14.
- IYT (Transportation): 281.45 to clear.
- IBB (Biotechnology): Watching to find support.
- XRT (Retail): 83.54 next support level.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
