On Tuesday, the stock market rallied right into resistance from its major moving average; however, this time could be different. While the market is choppy and traders should be extra careful, if Wednesday shows follow-through in both price and momentum, we can watch for Tuesday's rally to continue. The key is what has changed in momentum since last week's attempts.

The above two charts show the S&P 500 (SPY), and the Russell 2000 (IWM). Each is sitting in resistance, with the SPY near multiple highs from last week and IWM flirting with its 50-day moving average. So, what has changed since the previous attempts to clear this pivotal price level? The most obvious change is not found in price, but in our Real Motion momentum indicator.

As seen in the bottom of each chart momentum (red dotted line) is clearing its 50-DMA. Previous attempts were not as strong, as shown by the circles on 4/13. While momentum in IWM had cleared the 50-DMA around 4/13, the price did not follow. Now, momentum is clearing over the 4/13 high.

This is more obvious in the SPY. Notice how momentum never broke over the 50-DMA on 4/13 even when the price has cleared its 50-DMA. Now, the SPY is clearing on both price and in Real Motion.

Does this mean we have a guaranteed price move to the upside? It does not; however, this greatly increases the odds that we will get more follow-through tomorrow. How long follow-through will last is another story, as the market remains under pressure from inflation and geopolitical stress.

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ETF Summary

• S&P 500 (SPY): 445.75 level to clear and hold.   
• Russell 2000 (IWM): 201.63 flirting with the 50-DMA.  
• Dow (DIA): 350 pivotal.
• Nasdaq (QQQ): 347 to clear.   
• KRE (Regional Banks): 66.85 to hold.  
• SMH (Semiconductors): Needs to stay over 247.
• IYT (Transportation): 243 minor support.  
• IBB (Biotechnology): Now needs to hold over 128.
• XRT (Retail): Watch to stay over 50-DMA at 77.10.

Forrest Crist-Ruiz

MarketGauge.com

Assistant Director of Trading Research and Education