Market Update: Where Are Stocks Headed Next?

The major stock indices roared into the new year at fresh all-time highs, but have since entered into a short-term pullback that began January 24.

Check out our “no-nonsense” market analysis here to see where stocks may be headed next.

Nasdaq 100 ETF ($QQQ)

When stocks bounced back from their pullback lows on January 28, the move was led by a 1.6% gain in the tech-heavy Nasdaq 100 Index ($QQQ).

$QQQ rallied into resistance of both its 10-day moving average and the low of the bearish engulfing candle from January 24.

This convergence represents an obvious area of short-term resistance.

However, if enough investors believe the recent selloff is the beginning of a new bear market, then $QQQ could make another run to test its prior highs.

Ideally, we’d love to see a few weeks of chop to produce new buy setups:

$QQQ daily

Small-cap Russell 2000 ETF ($IWM)

The small-cap Russell 2000 ETF ($IWM) showed relative weakness by lagging behind both the S&P 500 and Nasdaq Composite during the last rally.

As such, $IWM is already testing key support of its rising 50-day moving average.

The first test of the 50-day MA in a new uptrend is generally a reliable area of support that attracts mutual funds, hedge funds, and other institutional investors.

Short-term resistance is found at both the 5 and 10-day moving averages, both of which are above the current price of $IWM:

$IWM daily

Apple ($AAPL)

Since Apple was a market leader during the previous rally, it is definitely worth monitoring as a leading indicator for the broad market’s next move.

When leading stocks start to fizzle out and are not quickly replaced with new market leadership, that’s typically a bearish sign for the broad market.

If $AAPL manages to hold above its 10-day MA and sets a new high, then $QQQ could follow:

$AAPL daily

What’s On Today’s Watchlist?

Given the extent of the recent rally, there are currently not many low-risk trade setups out there.

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