Tickers in this Article: SPY, DIA, QQQ, IWM
There was some hesitancy this week in stock prices. While the major indexes are trading above last week's close, the strength of those moves in some of the indexes is questionable and deserves a closer look.

S&P 500 SPDRS (NYSE:SPY) ETF, representing the S&P 500 index, is trading up from last Friday, making it a positive week for the index. Wednesday, Thursday and Friday saw consecutive new intra-day highs put in, the highest levels seen in seven months. The last time prices reached these levels was the July 7 high at $135.70. With that, the S&P has broken through resistance and is in a position to test the 52-week high at $137.18. The move higher this week brings current support up to $133.25, followed by $132 and then $130. A drop below $130 signals potential weakness and a potential reversal of the short-term trend higher. A rise above $137.18, on the other hand, clears resistance but enters a longer-term resistance area. Between $137 and $140 was an a significant price area between late 2006 and mid-2008, flip-flopping from providing resistance, to support and then resistance again. Therefore, while the trend remains higher (long-term and short-term) some caution is warranted in this area, especially with the declining volume as the market moves higher. (For related reading, see Interpreting Support And Resistance Zones.)

DJ Industrial Average (NYSE:DIA) ETF created a new 52-week high on Friday. The index is up from last week's close, but failed to break significantly above last week's price range. The new intra-day high this week moves up the short-term support to $127. This support is quickly followed up by $126 and $125. A drop below $125 indicates a larger correction may be under way as it would violate the upward sloping trendline in place since October. That said, the long-term trend that began back in 2009 is healthy and not in any danger. As for the upside, DIA has cleared short-term resistance but, like SPY, is heading into a longer-term congestion area that could act as resistance. $130 was a significant support and resistance level back in 2007 and 2008. (For related reading, see 4 Factors That Shape Market Trends.)

PowerShares QQQ (Nasdaq:QQQ) ETF, which represents the Nasdaq 100 index, also put an new 52-week high in this week as it continues its very steep ascent. Short-term support has moved up to $62 followed by $61. A drop below $59.50 would already be a decent decline from current levels, but also indicates further selling into the trendline support at $58. To the upside, a break above the recent high at $63.86 signals a potential move to $65 - a target based on the intra-day price action seen this week. Short-term traders may wish to keep an eye on the very steep trendline that began in mid-December. A breach of the trendline is likely to trigger declines in the support levels mentioned. The line currently crosses right under Thursday's low at $62.63.

Russell 2000 iShares (NYSE:IWM) ETF, representing the Russell 2000 index, is higher than it closed last week, but also failed to break above last week's price range with much conviction. It did make a new intra-day high though, the highest price seen in more than six months. The index remain well off its 52-week high at $86.81. Support comes in to the ETF at $81, with a decline below likely to push the price into further support at $80 and $78.50. $77.50 is where the trendline which began in October intersects, and a drop below it alters the short-term trend outlook to at least neutral, and potentially bearish. As mentioned last week, the ETF is in a resistance area from current levels right up to the 52-week high. If it does continues to push higher through the recent high at $83.31, the next target is $85.50. (For related reading, see 6 Popular ETF Types For Your Portfolio.)

The Bottom Line
All the ETF indexes except for the QQQ are into longer-term resistance areas. This is not a reason to sell, but it is a reason to be cautious. The trend remains up in all the indexes and that remains the primary factor that should be focused on until the trend actually falters. Watch for support and the trendlines to hold on pullbacks, if they don`t, that is the early warning signal. Upside targets remain in play if near-term resistance can be cleared next week.

At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.

Charts courtesy of stockcharts.com

comments powered by Disqus
Trading Center