After a shaky start to the week and the biggest single day drop so far this year on March 6, markets recovered the rest of the week. Markets continue to move forward in a strong uptrend. Even IWM, which was so weak last week, picked up steam and respected it's trendline. Most of the major indexes remain in the vicinity of recent 52-week highs signaling further advances for the short-term but there is longer term resistance at levels not too far above current ones. (For related reading, see Introduction To Technical Analysis Price Patters.)

S&P 500 SPDRS (ARCA:SPY) ETF, representing the S&P 500 index, is still signaling a strong advance. Having recovered nicely for the drop earlier in the week SPY managed to claw back losses and continues to trade in the vicinity of the 52-week high seen last week. The drop on March 6 stopped just above the longer-term trendline which has been in place since October. The recent test and successful support validates the trendline and makes it a good long-term and short-term signal of a potential reversal (and support point on declines). The trendline is currently crossing at $133.30, with a drop below signaling a likely to end to the upward movement (Tuesday's low at $134.36 can also be used a stop level or warning signal level). Currently the trend is still up and break and hold above the recent 52-week high at $138.19 suggests an advance to $141. Between $140 and $144 is a strong long-term resistance area.

DJ Industrial Average (ARCA:DIA) ETF is in a similar position to SPY. March 6's decline tested the trendline validating it on the shorter and longer-term. The trendline currently intersects at $127.80, although the low on March 6 at $127.18 provides a better signal of potential of danger - a drop below that level jeopardizes the uptrend and suggests further declines. The trend is up and a rise and hold above last week's fresh 52-week high at $130.37 signals an advance to $133. DIA is already trading within the long-term resistance band, which extends all the way up to $141.95. (For additional reading, see The Utility Of Trendlines.)

PowerShares QQQ (Nasdaq:QQQ) ETF, representing the Nasdaq 100 index, continues to be on fire, putting in a new 52-week high on March 9. The pullback on March 6 allows us to redraw a trendline starting in December, which will provide an early signal of a potential reversal. The trendline currently intersects just under $64 although the March 6 low at $63.23 can also be used as a stop level/support level. A drop below these levels means the ETF is losing steam and a further decline becomes highly likely - especially a drop below $63.23. Significant support is at $60. In terms of upside targets, the $66 target remains in effect from last week, with an additional target of $67.50 (will likely take a couple weeks or more to hit if trend continues higher).

Russell 2000 iShares (ARCA:IWM) ETF, representing the Russell 2000 index, had an aggressive rally to end the week after breaking lower last week. The sell-off early in the week tested the upward sloping trendline which has been in place since October and the trendline held. Throughout February the ETF was range bound, struggling to get above $83.31 (high of the range). With the trendline holding the ETF may have enough momentum to carry through that level now. If that upside breakout occurs the target is $85.50 followed by $86 and then the 52-week high at $86.61. On the other hand, a drop below March 6's low at $78.41 is likely to trigger selling into support at $75.

The Bottom Line
All the major index ETFs remain in uptrend mode and top picking is not recommended. The recent respect of trendlines means there is likely more upside to come as the selling was met with buying interest. A couple of the ETFs are in, or approaching, longer-term resistance areas which means trendlines and support should be monitored for potential signs of a reversal. (For more, see Analyzing Chart Patterns.)

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 stockcharts.com

Related Articles
  1. Trading Strategies

    Who Actually Trades or Invests In Penny Stocks?

    Although penny stocks are highly speculative, millions of people trade them daily. Here are 10 different types who do.
  2. Chart Advisor

    4 Stocks Still Flashing Buy Signals

    In the midst of volatility and a big market sell-off last week, these stocks are flashing buy signals.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares JPMorgan USD Emerg Markets Bond

    Learn about the iShares JPMorgan USD Emerging Markets Bond fund, which invests in bonds of sovereign and quasi-sovereign entities from emerging markets.
  4. Mutual Funds & ETFs

    ETF Analysis: SPDR Dow Jones International RelEst

    Learn how the SPDR Dow Jones International Real Estate exchange-traded fund (ETF) is managed and for whom the ETF is most appropriate.
  5. Active Trading Fundamentals

    How Hedge Funds Front-Run Index Funds to Profit

    Understand what front running is, and learn how hedge funds use this investing strategy to profit from the anticipated stock buys of index funds.
  6. Mutual Funds & ETFs

    ETF Analysis: Schwab US Large-Cap

    Discover how the Schwab U.S. Large-Cap exchange-traded fund is managed, the index it tracks and the investors for which it is most appropriate.
  7. Mutual Funds & ETFs

    ETN Analysis: Rogers Intl Commodity Energy Total Return

    Learn more about the Rogers International Commodity Total Return, which is an exchange-traded note that tracks a broad index of commodity futures.
  8. Technical Indicators

    Understanding Trend Analysis

    Trend analysis is the use of past performance to predict future price movement of a security.
  9. Forex Education

    These Are The Best Hours To Trade the British Pound

    The best times to trade the British pound are centered around economic releases at 1:30 am, 2:00 am, 8:30 am and 10:00 am U.S. ET.
  10. Mutual Funds & ETFs

    ETF Analysis: ProShares UltraPro Nasdaq Biotech

    Obtain information about an ETF offerings that provides leveraged exposure to the biotechnology industry, the ProShares UltraPro Nasdaq Biotech Fund.
RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  3. Tactical Trading

    A style of investing for the relatively short term based on anticipated ...
  4. Fintech

    Fintech is a portmanteau of financial technology that describes ...
  5. Indicator

    Indicators are statistics used to measure current conditions ...
  6. Intraday Momentum Index (IMI)

    A technical indicator that combines aspects of candlestick analysis ...
RELATED FAQS
  1. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  2. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  3. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  4. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  5. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
  6. Is there a situation in which wash trading is legal?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!