Since early March, the Market Vectors Russia ETF (RSX) has been one of the weakest ETFs in the market. RSX has been in a clear downtrend for the past 2.5 months, as it has set a sequence of lower highs and lower lows. Last week, on a burst of volume, this ETF lost support near $29.30. A rally back into resistance of this key mark could provide a shorting opportunity in RSX.
Now that we’ve seen heavy selling pressure for two days, it is probably a good time to review key support levels on the Nasdaq and the S&P 500. Price action was horrible on the S&P 500 on Friday, as it gapped down, opened at the high and closed at the low of the session. The next important support levels on the S&P 500 are 1,357 and 1,340. We would not be surprised to see a fairly significant bounce off either, or both of these levels. Notice that the S&P has now cracked its long term uptrend line and this mark should now serve as resistance.
On May 1st, the ProShares UltraShort MSCI Emerging Markets ETF (EEV) undercut and tested support of its 50-day moving average before reversing to close above this key mark. Yesterday, on an uptick in volume, EEV attempted to breakout above resistance of the four day high of $26.71. If EEV can clear yesterday’s high of $26.86 it could present a buying opportunity. We are adding EEV to the watchlist. Trade details are available to our subscribers in the watchlist segment of the newsletter.
Over the past month, on three separate occasions, the Market Vectors Indonesia ETF (IDX) has attempted to rally above the thirty dollar mark. Yesterday, on a burst in volume, IDX gapped down but reversed to close near session highs. A move above Tuesday’s high of $29.98 could present a buying opportunity in this ETF.
Given yesterday’s poor price action, an updated technical review of the main stock market indexes is in order. Below are charts of the S&P 500 ($SPX), Dow Jones Industrial Average ($DJIA), Nasdaq Composite ($COMPQ), small-cap Russell 2000 ($RUT), and the S&P MidCap 400 ($MID)…
The Market Vectors Pharmaceutical ETF (PPH) was one of the strongest ETFs in the market during the most recent pullback. Over the past four sessions, PPH has rallied back into resistance of its most recent swing high (52 week high) of $38.96. PPH could offer a buying opportunity on a pullback and undercut of its 20-day EMA. The formation of a reversal candle at that key support level would provide the perfect entry pivot. The possibility exists that PPH could move higher from its current level, but the reward to risk ratio would not be well enough in our favor to enter the trade at this price.
Since losing support of its 200-day MA on April 4th, the Vanguard MSCI Europe ETF (VGK) has rallied back into resistance of its 50-day MA. If VGK overcuts and forms a reversal candle at this key mark, it could present a shorting opportunity. We will be closely monitoring the price action in VGK for a possible short entry.
The SPDR S&P Retail ETF (XRT) recently found support but has now rallied near resistance of the April 19th high of $61.66. A retest of this level (false breakout or overcut), followed by a formation of a lower high, could provide the necessary price action for a potential long entry in this ETF. The blue and red arrows on the chart represent what we would see as the “ideal” price action necessary for XRT to establish a proper base from which to launch a potential rally.
The SPDR S&P Bank ETF (KBE) gapped up and formed a reversal candle as it tested both its 20-day and 50-day Moving Averages. KBE offers a potential buy entry above the ten day high of $23.48. Alternative, KBE could present a buy entry on another undercut of the 20 and 50-day moving averages. Under this scenario, KBE would have to form another reversal candle that would provide the pivot for the potential entry.
The S&P Consumer Staples SPDR ETF (XLP) has demonstrated excellent relative strength to the broad market during the most recent correction. Notice that as the S&P 500 has lost support of its 20 and 50-day moving averages, XLP has held support at its 20-day EMA. Further, XLP has spent the last three weeks forming a base. Although XLP does not currently offer a buy entry, with two or three more weeks of basing action, this ETF could become an excellent long opportunity. The ideal price action would involve XLP setting a sequence of lower highs and higher lows over the next several weeks and then forming a reversal candle to provide the ideal “buy pivot”.