Friday ends on a positive note, with the Dow Jones (DIA) and the S&P 500 (SPY) holding over their 200-day moving averages. Alongside them, Bitcoin has cleared 40k and is currently looking for 41k next. However, High Yield Corporate Debt (JNK) gapped lower Friday, creating a key area to watch for underlying market strength or weakness. The above chart shows how the DIA and SPY were both able to hold their 200-DMAs, while the Nasdaq 100 (QQQ) and the Russell 2000 (IWM) sit near the middle of their current trading ranges, as seen from the black lines.

While the major indices have key levels to clear and hold, we can also use JNK as an indicator based on investors' willingness to take on risky corporate debt. What makes JNK so useful is the potential large blowoff bottom it made Friday after gapping down.

Now we can watch for a reversal pattern based on it clearing the gap at $105.02.

That said, if JNK stays under Thursdays low, the stock market could still have more chop or consolidation to get through. On the other hand, if JNK clears $105.02, we can look for short-term buying opportunities, along with watching for key resistance levels in the indices to clear.

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ETF Summary

• S&P 500 (SPY): 461 resistance. Watch to hold the 200-DMA at 443.
• Russell 2000 (IWM): 203.90 to 188 is the current range.
• Dow (DIA): 350 to hold.
• Nasdaq (QQQ): 336 to clear.
• KRE (Regional Banks): Watch for second close over the 50-DMA at 72.19.
• SMH (Semiconductors): 287.73 resistance. 270 to hold.
• IYT (Transportation): Failed the 200-DMA at 262.
• IBB (Biotechnology): Watch to hold over the 10-DMA at 129.53.
• XRT (Retail): 83.54 resistance. 75.62 support.

Forrest Crist-Ruiz

MarketGauge.com

Assistant Director of Trading Research and Education