How to Navigate the Market with These 3 Symbols

Last week’s focus was the Russell 2000 (IWM), Transportation ETF (IYT) and Semiconductors ETF (SMH). IWM has shown us general market direction and sentiment as it contains 2000 small-cap U.S companies. IYT is the backbone or demand side of the economy as the U.S opens with the increasing vaccine deployment.

Then comes SMH, which has been involved in this year’s tech boom, but also in one of this year’s biggest supply chain disruptions. For a plethora of reasons, from car manufacturing to increasing computer needs from the work at home environment to crypto mining, the tech space has been hard pressed for computer chips to meet demands of large and growing tech companies.

From a technical standpoint, IWM continues to flirt with its 50-day moving average at $222.02. Last week, IYT started to drift lower, making it look worrisome when paired with IWM, which fluctuated between breaking its major moving average and holding its current price level. On top of that, SMH has been struggling to break through highs at 258.59.

With that said, raising worries of inflation linger in the background of many investors’ minds. Therefore, we have been watching the dollar index (UUP) along with precious metal and food commodities, like Invesco Agricultural Fund ETF (DBA) and gold (GLD). If the dollar were to begin struggling and break the support of the 50-DMA, this could cause fear, as a weakening dollar buys less goods, thus increasing import prices which can lead to inflation.

DBA and GLD can also display signs of inflation, as investors flock to their safety as prices increase.  

As for the Monday’s game plan, we can watch for our 2 key ETFs and Index to hold, break or clear their current price levels. From a bullish standpoint, this means watching IWM to hold over its 50-DMA and for IYT and SMH to head back up to recent highs.

Watch Mish give market insight on Cheddar TV…

With dividends rising, stock buybacks returning and yields tightening, the banks are worth looking at for a few new long positions. In this week’s edition of StockCharts TV’s Mish’s Market Minute, Mish looks at banks that offer commercial services in both FIAT, lending, and 24/7 liquidity.

ETF Summary

  • S&P 500 (SPY): At all-time highs
  • Russell 2000 (IWM): Watch to hold over the 50-DMA at 222.02
  • Dow (DIA): 332.86 support
  • Nasdaq (QQQ): 338.19 high to clear. Support 321.40
  • KRE (Regional Banks): Support 64.77 the 50-DMA
  • SMH (Semiconductors): 258.59 resistance
  • IYT (Transportation): 263.33 high to clear
  • IBB (Biotechnology): 145.50 support
  • XRT (Retail): Needs to clear 93, then 96.27

Mish Schneider

Director of Trading Research and Education

Forrest Crist-Ruiz

Assistant Director of Trading Research and Education