Weekend Stock Market Commentary: It’s Not Over Until…

Investors took a breather today from the recent buying frenzy.

Let’s review key price levels on the major stock market index ETFs (no additional commentary tonight):

S&P 500 (SPY)  Working off the runaway gap. 289.30 is a good spot to hold. If does, do I hear 300? If not, looking at 287.75 next, which would hold the gap. Worst case you do not want to see-a gap from current levels to below 288.68 that does not get filled.

Russell 2000 (IWM)  Made a new all-time high on Friday of 173.39. 171 big support.

Nasdaq (QQQ)  184 closest support number with its runaway gap. 195 could be some resistance if holds.

Dow Industrials (DIA)  We do not want to see this below 257.76

KRE (Regional Banks)  Like to see this continue to hold 62.47

SMH (Semiconductors)  110 resistance and 108 nearest support.

IYT (Transportation)  Broke the fast-moving average and is either going to hold and get back above 205.25, or fail 202 and then 200, which could mean a double top.

IBB (Biotechnology)  120 support to hold – watching.

XRT (Retail)  51 down to 50.25 area is the must-hold support. Back over 52 (again on Tuesday) will be impressive.

Note that you can get daily trading ideas and market insights over on Market Gauge.

She’s dancing, not singing!

Not yet anyway.

The market, after making new all-time highs in all four indices-3 of which had runaway gaps, saw some light selling at the week’s and month’s end.

The S&P 500, for example, after topping out midweek at 291.74, corrected for the last 2 days of the week. Until the last-minute push to green, that is.

The Dow also made new highs last week.

By Friday though, it closed slightly beneath 26,000, yet ultimately held the runaway gap.

As long as DIA holds above 257.80, that gap remains intact.

NASDAQ, the third of the indices to have a runaway gap, barely budged in price from its high point at 187.52.

QQQ closed the week with an inside day, right near those all-time highs.

That sets it up for Tuesday.

Either QQQ clears those highs and keeps going, or it fails 185.79 and sees its way closer to support about $3.00 lower.

Regardless, the runaway gap, shallower than the one SPY had, will maintain itself if QQQs do not trade below 182.95.

With all this good news for the bulls, what would make our portly lady sing?

5 major factors to watch out for.

  1. The runaway gaps get filled. Should that happen, it’s not necessarily bearish, but it definitely takes the wind out of the rally’s sails.
  2. The market gaps lower and does not run up from there. Specifically, should SPY gap below 288.68, the low from 8/27 and the runaway gap day, and not fill that gap, we go from looking at a runaway to a potential island top. Not good should that occur and confirm.
  3. Transportation (IYT), I never forget about that sector. Working off a possible reversal topping pattern and/or worse, a double top, this should be monitored carefully. If IYT can clear back over 205.25, the low of the day it made new ATHs, no worries. However, it will still have to make another new all-time high to neagate that reversal pattern. What keeps me up at night? That IYT makes at double top. That pattern I fear, would be the thing that makes our lady sing.
  4. The Russell 2000 (IWM) made a new ATH last Friday. It had been consolidating. IWM is the holdout on having a runaway gap. A move under 171 would be troublesome. A gap over Friday’s high inarguable.
  5. Note that I have not included any fundamental factors like tariffs, emerging market slowdowns, Iran and North Korean threats of aggressiveness. Why not? What I have spelled out is how any of those will or will not impact price. Price rules.

Therefore, as you enjoy your long Labor Day weekend, turn off the news.

Our dancing lady will be there waiting for you Tuesday morning.

Thanks for reading.

Twitter:  @marketminute

The authors may have a position in the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

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