Two of the major indices, including the Russell 2000 (IWM) and the Dow Jones (DIA), have cleared key resistance levels. However, the S&P 500 (SPY) and the Nasdaq 100 (QQQ) have yet to clear recent highs or major moving averages. Although Wednesday's price action looks hopeful, we should always be looking for the next area to clear or hold just in case we need to revise our trade plans.
Many traders bought into Wednesday's trading session once they saw resistance was cleared in IWM and DIA. Now, the same traders should expect these prior resistance levels to hold as support and watch for follow-through from the QQQ and SPY clearing their resistance levels, as seen in the above chart. Because the market has been more sporadic in movement, watching minor support/resistance areas can help us time new entries.
For many, trading has common emotional pitfalls relating to greed and missing out when the action looks good. Finding ways to add rules through specific and important price levels in the market is one of the best ways to deal with common trader emotions and keep yourself levelheaded when things quickly begin to move up or fall apart. Therefore, in the above chart, we can watch for all the key price levels we are observing in the short-term to not only hold but also to clear going forward. Use these levels to time the stock market, along with price levels in personal trades to improve short-term trading performance.
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ETF Summary
- S&P 500 (SPY): 459.89 50-DMA to clear.
- Russell 2000 (IWM): 203.90 new support to hold.
- Dow (DIA): 355.14 to hold as new support.
- Nasdaq (QQQ): 366.68 the 200-DMA to clear and hold over.
- KRE (Regional Banks): 72.30 new support.
- SMH (Semiconductors): 284 new support to hold.
- IYT (Transportation): 269 support.
- IBB (Biotechnology) 134.32 to hold.
- XRT (Retail): 83.14 resistance.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
