Both the S&P 500 (SPY) and the Nasdaq 100 (QQQ) failed to clear key resistance areas this past week.
Additionally, the CPI reported that inflation is yet again on the rise, sitting over 7% on a year-over-year basis as talks of war continue to heat up.
None of this makes a happy market. With that said, we’ve been able to navigate and take profit targets in three of our positions this past week. The three symbols we’ve taken profits in are Invesco Agricultural Fund ETF (DBA), Greece Country ETF (GREK), and Gold ETF (GLD).
With rates hikes set to increase and after such a large runup in 2021, the market has begun to trade in ranges, rather than picking an upward or downward trend. This can make very choppy price action and leads to the stagflation type of environment we have been talking about.
Though most of the time we have focused on technical analysis, many of our trades have an underlying fundamental reason behind them. Both GLD and DBA can help give protection against inflation, and even talks of war to some extent. On the other hand, GREK has been able to avoid much of the U.S market’s recent volatility and was able to set up and trend higher.
Looking back towards a rangebound trading style, the above chart shows current ranges we are watching within the major indices. Searching for support near the lows and resistance near the highs is our focus, as the market doesn’t seem to want to fully break down or have enough strength to breakout towards highs. Moreover, this gives us a sense of how to trade the equities market, with a focus on commodities as potential outliers.
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- S&P 500 (SPY): Either needs to clear back over 200-DMA around 444 or could break to lower of range.
- Russell 2000 (IWM): Flirting with the 10-DMA at 201.54.
- Dow (DIA): 337.90 support area.
- Nasdaq (QQQ): 338 support area.
- KRE (Regional Banks): 72.52 support area.
- SMH (Semiconductors): 249.46 main support area.
- IYT (Transportation): Needs to get back over 257.89 and hold.
- IBB (Biotechnology): 129.09 support.
- XRT (Retail): 83.14 resistance area.
Assistant Director of Trading Research and Education