With all three major ETFs, I'd use the 200 day EMA as a lower support target. I'd place upside resistance for the SPYs at 137, the QQQs at 59 and the IWMs at 86.5 - although I don't expect any of the averages to hit those levels soon. For now, the markets are still waiting out the EU situation and the determination of the US' economic trend.The QQQ's did hit that number and higher -- they closed the week at 59.6. But the SPYs ended the week at 134.5 and the IWMs at at 84. In addition, the transports have yet to rally strongly, taking away important confirmation of the QQQ rally.
Let's take a look at the charts.
Prices dropped on Monday, but gapped higher on Tuesday then consolidated on Wednesday. They again gapped higher on Thursday and consolidated gains on Friday. This chart is very encouraging for the bulls, as it shows a strong upward trend.
However, the daily chart shows a fair amount of upward resistance from the highs of several weeks ago and those established in early May. While the EMAs are bullishly aligned (the shorter are above the longer and all are moving higher) they have just recently "unbundled" and only recently started to move higher. In addition, the A/D and CMF lines are giving contradictory volume information and the MACD just went positive.
In contrast, the QQQs moved through important resistance levels, but did so on weak volume.
But the transports are nowhere near important upside levels to give us any kind of positive reinforcement.
The IWMs also have yet to make a new high. Their chart resembles the SPYs with prices being below major points of resistance.
There are two ways to look at the current market situation.
1.) The QQQs are making the first advance through important technical territory, to be soon followed by the other averages.
2.) The QQQs are rallying on average specific information, and the lack of confirmation from any of the other averages means the QQQs will be coming back down to a lower level.
Given the fundamental economic background, I think number two is by far the more likely analysis of the current situation.
