On Monday, the small-cap index Russell 2000 (IWM) found support near the bottom of its range. After last week's selling, this could either be a temporary bounce or a fake-out before weakness again sets in.
Because we are looking at the stock market from a rangebound perspective, we see the potential for dip-buying opportunities if tight risk parameters are used. With that said, what should we expect next and what are we currently watching?
When it comes to tight risk parameters, MP Materials (MP) is a great example, since it's sitting on support from its 200-day moving average, which gives a tight risk level along with Monday's low at $39.63.
Like IWM, MP needs to show upside follow-through over Monday's high in Tuesday's trading session. With that said, if this type of trade works out on Tuesday, both IWM and MP should close over Monday's high.
On another note, we are in earnings season, which can add another layer of volatility as big names can affect the market. Microsoft will report earnings on April 26th, followed by Facebook/Meta Platforms (FB) on April 27th. Therefore, keep an eye out for earnings and watch for upside potential based on support from range lows in the major indices.
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- S&P 500 (SPY) Watch for a close over Monday's high of 428.
- Russell 2000 (IWM): Found support near the bottom of the range. Needs to hold over 189.
- Dow (DIA): 336 support area.
- Nasdaq (QQQ): 333 new support.
- KRE (Regional Banks): 63.80 support area.
- SMH (Semiconductors): 237 pivotal.
- IYT (Transportation): 242 support.
- IBB (Biotechnology): 118 next support. Needs to clear back over 50-DMA at 127.
- XRT (Retail): Watch Monday low as new support at 71.90.
Assistant Director of Trading Research and Education