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The major averages pushed above resistance on Thursday but then came under pressure on Friday. The Dow Industrials closed down 255 points for the day, with Boeing Co. (BA) down 6.8% and Johnson & Johnson (JNJ) dropping 6.2% just on Friday. One of the few bright spots was Coca-Cola Co. (KO), which was up 1.8% on Friday. It lead my Dow’s most oversold list last week.

Weekly Market TOMASPRAY-VIPERREPORT.COM

For the week, it was a mixed close, with the Dow Jones Industrials down slightly alongside the Dow Jones Utility Average. The S&P 500 and Nasdaq 100 recorded modest gains of 0.54% and 0.31%, The Dow Jones Transportation Average was the strongest, as it gained 2.11% and is now up 14.6% YTD. It is still below the year’s high when it was up 18.7% in April (see table).

But it was the Russell 2000 Small Cap Index that got most of the attention, up 1.65% last week. It is still lagging the other major averages, only up 14% YTD. By comparison, the Nasdaq 100 is up 24.3% and the S&P 500 is up 19.1% YTD. Still, many are wondering: is this the start of a major new move higher in the small-cap stocks?

IWM Weekly TOMASPRAY-VIPERREPORT.COM

The weekly chart of the iShares Russell 2000 (IWM) shows that it has bounced from the low three weeks ago of $144.93, to close last week at $152.79. IWM also hit lows in August ($143.75) and May ($144.50). The rally from the August low only lasted three weeks, and its next resistance is still in place at $155.40. There is major resistance at $158.28 (line a) with the weekly starc+ band at $163.85.

The weekly Russell 2000 Advance/Decline line has moved back above its WMA, which is an encouraging sign. The A/D line slightly exceeded the downtrend from the 2018 highs in September but reversed to the downside the following week. To confirm an intermediate uptrend, the IWM A/D line needs to close well above the September high.

The volume on the recent rally has been a problem for most of the market-tracking ETFs, as the On Balance Volume (OBV) has been weaker than prices. The weekly OBV for IWM is still below its WMA, with this past week's volume lower than the prior week's. It will be important to watch volume on a further rally.

Turning to the outlook for sectors, the three top performers last week were the Health Care Sector (XLV), Real Estate Sector Fund (XLRE) and the Financial Sector Fund (XLF). XLF got a boost last week from the big bank earnings, but as I noted in last week’s Tweet, the volume so far in the SPDR S&P Bank ETF has not been impressive.

The week finished with the imposition of new EU tariffs that many think will impact the prices of many consumer products. Consumer spending has been driving the economy, so this may not be what an already-slowing economy needs right now. Of course, the EU has already announced some of its retaliatory moves, and there could be more. It is doubtful that the Trump administration's newly discovered secret weapon on trade will help resolve this new tariff battle.

On Friday, we get the month-ending reading in Consumer Sentiment, with Consumer Confidence coming on October 29. Last Friday, the Leading Economic Index (LEI) came in at -0.1% while the consensus reading from Econoday was for an increase of 0.2%. The downward revision of the August reading by -0.2% was an additional sign that the U.S. economy is slowing.

With the S&P 500 just 1.3% below July’s all-time high, there are still significant risks for the market, and earnings season volatility will not help. Netflix (NFLX) beat on earnings by a wide margin Wednesday afternoon and surged in after-hours trading. After a high early Thursday of $304.27, NFLX then closed Friday at $275.20, down 2.7% for the week.

One can avoid the risk of individual stocks provide by investing or trading in ETFs. However, it usually comes without the same potential for reward. For example, despite Friday’s sharp decline in Johnson & Johnson (JNJ) stock, the Health Care Sector (XLV) was only down slightly. JNJ at 9.8% is the largest holding in XLV.

As for the small-cap stocks I will be watching to see how IWM and the other small-cap ETFs act on the first pullback before becoming an aggressive buyer.