Why The Russell 2000 & The Nasdaq 100 Had The Largest Market Impact

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Tuesday, the Nasdaq 100 (QQQ) came close to clearing the 50-day moving average at $321.08.

This was the second attempt to clear this moving average with the first attempt happening last week.

Though the QQQs were unable to hold over the 50-DMA they were able to hold over its short-term 10-DMA.

The next test will be if Nasdaq holds this current price range and makes the 3rd attempt or break lower.

If the price reverses, we could be looking at a retracement to recent lows at around $297-300.

On the other hand, Russell 2000 (IWM) broke under the 50-DMA.

Next, we watch for IWM to confirm its break of the major price level with a second close under.

This means that 2 of the 4 major indices are under their major moving averages.

These caution phases are meant to be exactly what they are-cautionary tales but not necessarily the end of the bull run.

When the major indices are not in alignment, price action tends to get more volatile as traders/investors liquidate positions due to unclear market directions.

Jerome Powell, Chairman of the Federal Reserve has also displayed some indecision when it comes to the future economic outlook.

Recently the Powell stated conflicting views that the economy was “much improved” but yet the economic recovery was “far from complete.”

These vague claims do not help the market’s already uneasy stance.

Some of our recent articles have talked about choppy market environments concluding that if you are not sure what to do from an investing/trading standpoint, often its best to sit on your hands and wait for clarity.

Additionally, if you are already heavily invested, you could decrease risk exposure by cutting down positions sizes or eliminate ones that are not working.

ETF Summary

S&P 500 (SPY385.80 next support the 50-DMA

Russell 2000 (IWMBroke the 50-DMA at 220. Watching for second close underneath.

Dow (DIA) Next support area 320.

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