Resistance Found Near The Upper Trend Line In These ETFs (SPY, QQQ, DIA, IWM)
Following back to back sessions of light volume rallies, stocks closed higher yesterday on an uptick in trade. All of the major indices finished the session higher. However, a spurt of late session selling left stocks well off session highs. The S&P MidCap 400 led the move higher, as it added a solid 1.0%. Both the Nasdaq and the small-cap Russell 2000 (NYSEARCA:IWM) tacked on 0.9%, while the S&P 500 and the Dow Jones Industrial Average (NYSEARCA:DIA) improved by 0.5% and 0.4% respectively. Overall, yesterday’s gains were solid but lacked conviction.
Market internals were bullish yesterday. Volume climbed by 24% on the Nasdaq and 18.8% on the NYSE. Further, advancing volume topped declining volume by a ratio of 2.3 to 1 on the NYSE and 4.0 to 1 on the Nasdaq. Despite the positive price action, yesterday marked the first time in three days that the market posted an accumulation day. However, the fact that both indices closed well off sessions highs suggests that the market may be losing some steam. Strong accumulation days occur when the market closes at session highs on expanding volume.
Yesterday, the PowerShares Nasdaq Composite ETF (NASDAQ:QQQ) rallied into resistance of the upper trend line of its trend channel, and then sold off to close in the middle of the intraday range. Yesterday’s high should now serve as a significant resistance level for QQQ. Above this key mark, QQQ has resistance at $67.70 and $68.60. Should QQQ pull back from the current level, it should find support near $65.25 (the breakout), $64.50 (20-day EMA) and $63.40 (50-day MA).
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The Daily S&P Depository Receipts (NYSEARCA:SPY) also found resistance near the upper trend line of its trend channel. However, the SPY found resistance just below this key mark. Above yesterday’s high SPY should find resistance from $141.50 to $142.10. On a pullback, SPY has support at its 20-day EMA ($137.12), its previous swing low of $135.50 and the convergence of its lower trendline and its 50-day MA ($134.30).
The market continues to grind higher but in a somewhat unconvincing manner. On Monday and Tuesday we saw strong price action but no volume. Yesterday, we saw the market rally on strong volume but unconvincing price action, as the major indices faded into the close. Now that the broad market is at key resistance, we expect to see a pullback in the next day or two.
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