When the market struggles to decide which direction to travel in, we tend to see increased volatility. Throughout last week the market was struggling to pick a direction until finally it threw in the towel and broke lower near the end of Friday. This is a considerable break in price because three of the major indices fell under key support levels.
As seen in the above chart, the NASDAQ 100 Invesco QQQ Trust (NASDAQ:QQQ) broke support at $378 while the Dow Jones SPDR® Dow Jones Industrial Average ETF Trust (NYSE:DIA) fell under the low from 8/19 at $347.31.
On the other hand, the S&P 500 SPDR® S&P 500 (NYSE:SPY) and the Russell 2000 iShares Russell 2000 ETF (NYSE:IWM) are also sitting in weak price areas. If IWM cannot get back over its 50-DMA at $221.75, the next area to hold comes in at $217.69 from the 200-DMA.
Additionally, the SPY does not have immediate support until its 50-DMA at $441. Since the beginning of 2021, the SPY’s 50-DMA has been a key support level with price only dipping below briefly. That also means a visit to the major moving average in the SPY could be a buying opportunity.
With that said, the bulls best hope for Monday is if IWM can get back over its pivotal 50-DMA and for DIA to clear back over $347. If this happens it could help the SPY and the QQQ’s find intraday support. However, if the market continues lower, watch the SPY’s 50-DMA to hold along with the IWM’s 200-DMA.
Now that we have covered key pivotal price levels, from a fundamental perspective we can watch the transportation sector for further insight.
While there are many factors and numbers that can be crunched for deciding the strength of the overall economy, one easy method is to watch the movement of goods. In a robust economy, the movement of goods should continue to grow as the country prospers and people buy more stuff.
However, since the transportation sector, via iShares Transportation Average ETF (NYSE:IYT) has been waning in price and has failed multiple times to clear its 50-DMA at $254, it is telling us that the economic outlook is slowing. Now IYT has broken its 200-DMA at $248.25. This could be leading the economy and the market into a slower and more stagnant growth period.
Therefore, if IYT continues downward, keep an eye on commodities and precious metals as they could be the next big runners.
ETF Summary
- S&P 500 (SPY) 441 support.
- Russell 2000 (IWM) Needs to get back over 221.75
- Dow (DIA) Broke support of 347.31.
- NASDAQ (QQQ) Needs to find support.
- KRE (Regional Banks) Could not hold over the 50-DMA at 64.12. Watching 63.19 next.
- SMH (Semiconductors) One of the strongest sectors. Holding near highs.
- IYT (Transportation) 248.25 the 200-DMA pivotal area.
- IBB (Biotechnology) Sitting in support from 173 area.
- XRT (Retail) Needs to get over 97 and hold. 91.49 support.
- Junk Bonds (JNK) Watching to hold the 50-DMA at 109.50.
- IYR (Real Estate) 106.55 the 50-DMA.
- XLP (Consumer Staples) High to clear 73.25. 71.29 support.
- GLD (Gold Trust) 166.74 support area.
- SLV (Silver) Key support 21.20.
- XME (S&P Metals and Mining) Trading sideways.
- USO (US Oil Fund) Choppy. Watching for second close over the 50-DMA.
- TLT (iShares 20+ Year Treasuries) 146.66 support.
- USD (Dollar) 91.95 support.
- DBA (Agriculture) 18.57 minor support from 17-Week exponential moving average.
- VBK (Small Cap Growth ETF) 293 support