After spending much of the week in the resistance area between $136 and $137, the S&P 500 SPDRS (NYSE:SPY) manged to create a new 52-week high on Friday, piercing the $137.18 level last seen back in May, 2011. The break through resistance is significant and confirms the moves in the Dow Jones Industrial Average (NYSE:DIA) and the Nasdaq 100 (Nasdaq:QQQ) ETFs. The Russell 2000 ETF has been the second strongest, of the indexes mentioned, so far this year but remains well off its 52-week high. The indexes each have their own levels of significance but can also be used a group to confirm overall trends.

Investopedia Markets: Explore the best one-stop source for financial news, quotes and insights.

S&P 500 SPDRS (NYSE:SPY) ETF, representing the S&P 500 index, made a fresh 52-week high on Friday. While it is still uncertain if the market will be able to hold this new ground, it does send a positive signal and keeps the uptrend in motion on a short-term and longer-term basis. SPY has been moving within a trend channel (higher) since the start of the year, and that channel continues to hold. With the recent price move on Friday above last Tuesday's high the next target is the upper band of that trend channel - next week this will be right around $140. That same trend channel provides support at $135. A drop below this level is likely to find support at $131.50 - the trendline that began back in October, or at $130 - a significant support area and where the 200-day moving average is also very close to. (For related reading, see The Utility Of Trendlines.)

DJ Industrial Average (NYSE:DIA) ETF also made a new 52-week high on Friday. The trend remains higher since the October low and is not in any immediate danger of breaking. Trendline support comes in at $126.40 and is followed shortly by the 200-day moving average at $125. Therefore, the trend remains healthy until those levels are pierced, which would then bring about the possibility of a larger correction. The trend higher has slowed in 2012 compared the impressive volatility seen in the last few months of 2011. This has resulted in an ascending wedge formation in DIA, with the price very close to the up band. If price moves aggressively through this upper band, it would show that the trend is accelerating. Throughout February, the price has continually crept along this band, edging higher. Based on the average weekly movement of $2.62, support should hold next week at $127.30 and in the event of a rally, $133 is likely to cap upside moves.

PowerShares QQQ (Nasdaq:QQQ) ETF, which represents the Nasdaq 100 index, continues to power higher in an aggressive fashion. The move above $63.86, mentioned in last week's post, and the follow-up move through $64 signals the next advance to $65. The target of $65 is based primarily on the (approximately) $1 range QQQ has spent time in recently, which is then added to the breakout price. $65 is also the top of the trend channel which we can see this market has been in since August, 2011. Therefore, $65 is likely to pose resistance. A significant rise above that level in a short period of time indicates (while hard to believe) an acceleration of this already steep ascent. The uptrend is not in any danger at this time as the trend will remain higher even in the event of a steep correction. Therefore, if desired, $62.50 can be used as support and a stop level as a drop below this level could trigger additional selling into $60 or even $58 - areas of primary support. The 200-day moving average is also in this area.

Russell 2000 iShares (NYSE:IWM) ETF, representing the Russell 2000 index, has had a strong week in percentage terms but remains well below the 52-week high at $86.81. The trend remains higher for IWM but since early February the ETF has been moving sideways between $83.31 and $81. The breakout of this range is highly likely to determine the direction of the ETF next week. With the trend higher, the other indexes continually pushing through resistance and the price (of IWM) very close to the upper portion of the range the bias is for an upside breakout. $81 provides the support, and a break below it indicates a downside target of $78.70. This is trendline support and the 200-day moving average is also just below this level. If the price moves above $83.31 the target is $85.50. (For related reading, see 6 Popular ETF Types For Your Portfolio.)

The Bottom Line
Except for IWM, all the other major indexes have recently made fresh 52-week highs. The trends all remain strong and with a number of factors pushing IWM to the upside, it too is likely to resume its upward course after completing this consolidation. The trend should continue to be traded until there is some indication - a price signal - that it is over. Support levels can be used to manage risk; if support is broken it indicates a further decline but should be kept in perspective of the larger trend.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

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

Charts courtesy of

Related Articles
  1. Chart Advisor

    Copper Continues Its Descent

    Copper prices have been under pressure lately and based on these charts it doesn't seem that it will reverse any time soon.
  2. Technical Indicators

    Using Pivot Points For Predictions

    Learn one of the most common methods of finding support and resistance levels.
  3. Mutual Funds & ETFs

    Buying Vanguard Mutual Funds Vs. ETFs

    Learn about the differences between Vanguard's mutual fund and ETF products, and discover which may be more appropriate for investors.
  4. Mutual Funds & ETFs

    ETFs Vs. Mutual Funds: Choosing For Your Retirement

    Learn about the difference between using mutual funds versus ETFs for retirement, including which investment strategies and goals are best served by each.
  5. Mutual Funds & ETFs

    How to Reinvest Dividends from ETFs

    Learn about reinvesting ETF dividends, including the benefits and drawbacks of dividend reinvestment plans (DRIPs) and manual reinvestment.
  6. Chart Advisor

    Watch These Stocks for Breakouts

    These four stocks are moving within price patterns of various size, shape and duration, and are worth watching for a breakout
  7. Mutual Funds & ETFs

    Best 3 Vanguard Funds that Track the Top 500 Companies

    Discover the three Vanguard funds tracking the S&P 500 Index, and learn about the characteristics and historical statistics of these funds.
  8. Forex Fundamentals

    How to Buy Chinese Yuan

    Discover the different options that are available to investors who want to obtain exposure to the Chinese yuan, including ETFs and ETNs.
  9. Trading Strategies

    How to Trade In a Flat Market

    Reduce position size by 50% to 75% in a flat market.
  10. Mutual Funds & ETFs

    ETF Fees: Why BlackRock is the Latest to Cut Them

    Low expense ratios are a big selling point for ETFs, but are they being focused on too much?
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>

You May Also Like

Trading Center