This article was written Forrest Crist-Ruiz, Assistant Director of Trading Education and Research at MarketGauge, temporarily filling in for Mish Schneider.
Last Friday, we noted how major symbols (QQQ, IWM, JNK, SMH) bounced off the 50-DMA. Now, with the market still undecided, we can build a plan on what to look for if we break under the 50-DMA.
Let’s take a look at the QQQs and the SPYs on a daily chart below.
Here, we can see that while the QQQs have settled down almost perfectly on the 50, the SPY has a little more to go. With a break of the 50, we then would look for a second day to close under the 50-DMA. This is very important because the second day is confirming a caution phase change. Many times, a moving average is broken, but the security closes higher the next day. If both symbols break and confirm, this makes a stronger case for the continuation down.
You might then think, “Well great! Now we see prices confirming a breakdown, where might the price go next?”
Ahh, I’m glad you asked. If we have convincing closes under the 50 bringing us further away from the 50-DMA, the next point of interest would be 260 for the QQQs and 323 for the SPY. These prices are right at the 17-week Exponential moving average for both symbols. This leaves the QQQs in a prior consolidation area and the SPY in a prior consolidation area, with support from June’s highs.
We can never be 100% sure what the market will do, but looking for past support areas and key indicators can help us prepare immensely!
- S&P 500 (SPY): 329 support
- Russell 2000 (IWM): Broke 50-DMA, watching for a continuation
- Dow (DIA): 271 support
- Nasdaq (QQQ): Sitting on 269 50-DMA. Watching for break lower.
- KRE (Regional Banks): Also sitting on 50-DMA
- SMH (Semiconductors): Next support 159
- IYT (Transportation): Watching for a break back over the 10-DMA with resistance at 203
- IBB (Biotechnology): Watching for support at 124
- XRT (Retail): Next support at 50-DMA 48.00.
- Volatility Index (VXX): Broke 50- and 200-DMA. Watching for continuation
- Junk Bonds (JNK): New Sitting on 50-DMA. Watching
- LQD (iShs iBoxx High-Yield Bonds): 134.56 next support
- GLD (Gold Trust): Held 180 support. A close over the 10-DMA would be nice.
- GDX (Gold Miners): Holding onto the 50-DMA – can it get back over?
- SLV (Silver): 23.00 support and watching
- USO (US Oil Fund): Large breakdown with news of price cuts.
- UNG (Natural Gas): Did not clear 14 and broke down.
- TLT (iShares 20+ Year Treasuries): Watching to stay above 10-DMA
- USD (Dollar): 10-DMA resistance. Closed under 50-DMA, watching for confirmation
- VNM (Vietnam): Held the 10-DMA
- JO (Coffee): Still looks good
- CANE (Sugar): Ended the day green. Watching to clear MAs
- Soybeans (SOYB): Closed higher
- DBA (Agriculture): Needs to continue higher passing the MAs
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education