Monday mainly showed consolidation within the major indices. The Russell 2000 (IWM) spent most of its time within Friday's price range, along with the S&P 500 (SPY) and the Nasdaq 100 (QQQ) having inside day chart patterns. Along with the stock markets' inconclusive price action, the High Yield Corporate debt ETF (JNK) is confirming that the best plan for trading is to wait for Tuesday.

Looking at the above chart of the JNK ETF, we can see an inside day chart pattern is created from Monday's trading range, fitting inside the trading range from last Friday. With that said, if Monday was going to show a reversal pattern, it would have closed over Friday's highs at $104.75. Additionally, we are still watching for JNK to fill its price gap from last Thursday's low, as shown by the black line in the above chart.  

In the shorter term, we can now watch JNK to clear Friday's high as a small breakout from Tuesday's consolidative price action. This can give us confidence in taking trades that tend to closely follow the general markets' price action as JNK is a good risk-on or -off indicator.

For trade ideas, MP Materials (MP) has an interesting setup. Though it recently broke underneath its 200-Day moving average at $36.25, MP is now back over the major moving average and looking to clear the 10-DMA next at $38.04. Fundamentally, MP sits in a strong space, as it's one of North America's largest mines for rare earth materials used in many devices from phones to electric vehicles.

With that said, technical analysis is key. Therefore, watch for MP to clear and hold over its 10-DMA along with JNK to either clear $104.75 or fill its gap for a strong buy signal at $105.02.

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ETF Summary

• S&P 500 (SPY): Inside day. 472 to clear.
• Russell 2000 (IWM): Holding the 10-DMA at 198.28.
• Dow (DIA): 353.25 to clear.
• Nasdaq (QQQ): 362 resistance.
• KRE (Regional Banks): Now needs to hold over its 50-DMA at 72.16.
• SMH (Semiconductors): 284 resistance. 270 to hold.
• IYT (Transportation): Holding the 10-DMA but needs to close back over the 200-DMA at 262.85.
• IBB (Biotechnology): 134.32 to clear.
• XRT (Retail): Needs to clear the 10-DMA at 79.62.

Forrest Crist-Ruiz

MarketGauge.com

Assistant Director of Trading Research and Education