Over the past three trading days, the major stock market indices have made a remarkable rally from recent lows.
However, the small-cap index Russell 2000 (IWM) has only bounced back into the middle of its trading range.
As seen in the weekly chart (below), IWM has spent a large portion of time stuck between $234-208 with a short-lived break to new highs.
Overall, IWM has been lagging the rest of the stock indices and is now back in the middle of its range with a decent amount of overhead resistance.
With that said, this is not the case for the other indices as the S&P 500 (SPY), Nasdaq 100 (QQQ), and the Dow Jones (DIA) have held upward trends.
However, we should be watchful if other indices start to behave like IWM.
One reason other indices could become rangebound is from stagnant economic growth from rising inflation.
Additionally, without any more stimulus packages and continued bond tapering from the Fed, the market does not have a lot of upside potential to focus on. While demand is expected to grow, supply chain problems will persist through the next year leading to possible stagnation. There is also the idea that the Fed could begin to raise interest rates sooner adding overhead pressure to the stock market.
With that said, price action is still king.
Therefore, if the indices are going to prove the stagflation theory wrong through next year, DIA, SPY, and QQQ should clear highs and hold them.
Constant new highs paired with a steady supply of goods is what the market needs to combat stagnant and potential rangebound trading through next year.
Stock Market ETFs Trading Analysis & Summary:
S&P 500 (SPY) 473.54 is the high to clear.
Russell 2000 (IWM) Watch for a second close over the 200-day moving average at 224.37
Dow Jones Industrials (DIA) Confirmed a bullish phase with a second close over the 50-DMA at 353.53.
Nasdaq 100 (QQQ) needs to clear 401.19
KRE (Regional Banks) needs to clear 71.94
SMH (Semiconductors) created a doji candle today. 318.82 is the high to clear.
IYT (Transportation) created a doji candle today. 273.72 is price resistance.
IBB (Biotechnology) 153.38 is price resistance.
XRT (Retail) needs to clear its 50-day moving average at 95.72
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The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
