Key Sectors Hover Over Support While the Major Indices Flounder

On Monday, we talked about specific sectors weakening as they teetered on the edge of support from their major moving averages. The main three were Transportation (IYT), Retail (XRT) and Semiconductors (SMH). It just so happens that these sectors perfectly align with the holiday season as people begin to do what they do best, consume and buy more stuff. Having said that, this should boost transportation along with tech and retail stores if they can build momentum. Though supply issues continue, we can watch for the demand side of the economy to hold through these ETFs.

However, while key sectors are holding up, the major indices including the S&P 500 (SPY), Nasdaq 100 (QQQ), Dow Jones (DIA) and the Russell 2000 (IWM) are still in a pivotal area with looming resistance ahead.

As seen in the above chart, none are attempting a break over recent resistance areas (black line). Instead, they continue to look weak or neutral. This leaves investors in a tough spot as the major indices have come back from recent lows, but seem to be holding their breath for a reason to push higher. Therefore, we need to watch for resistance to clear and trade carefully as the market mulls over its current price action.

With that said, if these key indices can outperform the overall market, this could be the next tip that the market will continue to hold and we can look for more buying opportunities.

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ETF Summary

  • S&P 500 (SPY): Resistance 442 area. 426 support.
  • Russell 2000 (IWM): Consolidating with Support at 216.76.
  • Dow (DIA): 350 resistance.
  • Nasdaq (QQQ) 350 next support. Needs to clear 365.69.
  • KRE (Regional Banks) Doji day. Needs to get back over 70.
  • SMH (Semiconductors) 248.83 support.
  • IYT (Transportation): Watching to stay over the 250.55.
  • IBB (Biotechnology): 153.38 support.
  • XRT (Retail): Holding the 200-DMA at 89.03.

Forrest Crist-Ruiz

Assistant Director of Trading Research and Education