On Wednesday, the Russell 2000 (IWM) failed to make a second close over its 50-day moving average.

As the current leader of the major indices, IWM has been playing a very important role in the overall market direction. While Tuesday's strength in IWM hasn't carried over, it does have a consolidative inside-day chart pattern. With some more patience, IWM still can clear its moving average and make a recuperation phase change over the 50-DMA. However, if IWM fails to hold this area, we could see a quick return to support at $181.

With that said, let's look at the other major indices for market direction hints. When looking at the Nasdaq 100 (QQQ) and the S&P 500 (SPY) compared to IWM, the main difference is that both QQQ and SPY have small consolidative ranges, while IWM does not. Instead, IWM has attempted to trend higher while the other indices are stuck within their ranges. While this could be showing the rest of the market is a bit sluggish, on the upside, these mini ranges make watching for a breakout or breakdown in price easy to spot. (In the above charts, the mini ranges are shown in black lines.)

With that said, if the current market is looking to head upwards, not only should IWM clear its major moving average, but both the tech-heavy Nasdaq and S&P 500 need to clear their range highs. If these symbols make a failed rally, stay cautious and watch for the range support levels to hold or break.

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ETF Summary

• S&P 500 (SPY): 417.44 to clear.
• Russell 2000 (IWM): Inside day. 190 to clear and hold.
• Dow (DIA): 334 resistance.
• Nasdaq (QQQ): 314.56 resistance.
• KRE (Regional Banks): 65 resistance. 63 support.
• SMH (Semiconductors): 237 minor support.
• IYT (Transportation): 228 pivotal.
• IBB (Biotechnology): 112 support area. 119 to clear and hold.
• XRT (Retail): 68 to clear.

Forrest Crist-Ruiz

MarketGauge.com

Assistant Director of Trading Research and Education