Wednesday, the major indices along with key sectors held pivotal support areas.
In the chart above we can see that the small-cap index—iShares Russell 2000 ETF (NYSE:IWM)—has put in some work to create a head and shoulders chart pattern.
A head and shoulder pattern has 3 peaks with the outside two being close in height to each other. This pattern can help predict bullish or bearish trend reversals. Luckily for the bulls, a not so obvious support area was held.
By drawing a trend line from the start of the left shoulder across closed candles, a neckline is created. Most traders tend to focus on trendlines that are based on the highs or lows of the bars, but trend lines that are based on closing prices are just as important.
The neckline drawn above is based on closing prices, and it shows how important this technique can be and revealing otherwise hidden support levels!
Another influential hidden support level can be seen in, MarketGauge’s Real Motion indicator.
Just like price action, Real Motion finds support and resistance at its 50 and 200-day averages, and as a result, the price action reverses.
The circles on the chart above show several examples of Real Motion support and resistance identifying turning points that would be unexpected by looking at the price action alone.
Real Motion sitting on its 200-day average helps confirm that IWM's rally has support and that price and momentum agree with the move higher.
With that said, IWM was not the only one to hold over support.
Other indices, along with key sectors, were also able to close above their relevant important moving averages.
For instance, Transportation—iShares Transportation Average ETF (NYSE:IYT), Biotech—iShares Nasdaq Biotechnology ETF (NASDAQ:IBB), S&P 500—(SPDR® S&P 500 (NYSE:SPY), and NASDAQ—Invesco QQQ Trust (NASDAQ:QQQ)—all closed over their 10-DMAs with Semiconductors—VanEck Vectors Semiconductor ETF (NYSE:SMH)—able to hold its 50-DMA.
With so many sectors and indexes bouncing off of well-defined support levels, we have clear price levels that need to hold as a break of these levels would not be a good sign for the market.
ETF Summary
- S&P 500 (SPY) Closed over the 10-DMA at 413.25.
- Russell 2000 (IWM) Resistance 226.
- Dow (DIA) Held over 338.73 the 10-DMA.
- NASDAQ (QQQ) Back over the 10-DMA at 338.42
- KRE (Regional Banks) closed right on 66.31 the 50-DMA
- SMH (Semiconductors) Held 242.45 the 50-DMA.
- IYT (Transportation) Hovering around highs.
- IBB (Biotechnology) 146 support. Resistance 155.29
- XRT (Retail) Support 86.72 the 50-DMA.
- Volatility Index (VXX) 9.73 recent low.
- Junk Bonds (JNK) 108.58 support.
- XLU (Utilities) Cleared 67.93 high but could not hold.
- SLV (Silver) Watching for second close over the 50-DMA at 24.14.
- VBK (Small Cap Growth ETF) 286.36 resistance.
- UGA (US Gas Fund) 31.61 support.
- TLT (iShares 20+ Year Treasuries) Cleared the 50-DMA 139.57.
- USD (Dollar) support from recent low at 90.86.
- MJ (Alternative Harvest ETF) Watching to clear the 10-DMA at 21.22.
- LIT (Global X Lithium & Battery Tech ETF) Flirting with the 50-DMA at 61.83.
- XOP (SPDR® S&P Oil & Gas Exploration & Production ETF) 76 resistance.
- DBA (Invesco DB Agriculture Fund Agriculture) 17.63 support.