A New High For The Small Cap ETF May Be Followed By A New High For QQQs

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Includes: DIA, IWM, IYT, QQQ, SPY
by: Richard Suttmeier

Summary

Last week the Dow 30 went down, then up 400 points, but Diamonds ETF closed Friday just below my annual pivot of $246.52.

The Spiders ETF traded randomly between my semiannual pivot of $264.10 and my annual pivot of $276.34.

The QQQ ETF is poised for a new high as my monthly risky level for June is $179.19.

The Transports ETF begins June between my quarterly pivot at $195.90 and my new monthly risky level at $199.30.

The Russell 2000 ETF set its all-time intraday high of $164.39 on May 30 with my annual risky level at $165.04.

Today’s Market Cross-Currents

One of the fundamentals affecting the stock market is reacting to commentary related to the potential trade war. The volatility resulting from the tariff rhetoric has global investors flocking into dollar-denominated assets including small caps which are deemed immune from the tariff debate. Money is also flowing into momentum stocks such as Amazon.com (NASDAQ:AMZN) and Netflix (NASDAQ:NFLX) which set new all-time highs on Friday pushing the Nasdaq 100 to a new high.

Overseas, China is a major target for trade adjustments and the Shanghai Composite set its 2018 low of 3,041 on May 30 and is deep into correction territory 14.3% below its 2018 high of 3,587.03 set on Jan. 29. Markets in Japan and Germany are down year to date with their annual highs also set in January.

A pending trade war is thus altering the flow of funds from overseas markets into U.S. markets!

The weekly charts for the five U.S. equity ETFs are positive given Friday’s closes above their five-week modified moving averages at $245.81 for Diamonds, $270.10 for Spiders, $167.17 for QQQs, $192.43 transports and $158.90 for the Russell 2000. The small cap ETF is now overbought on its weekly chart.

Today’s Equity ETF Scorecard

Scorecard For The Five Major Equity ETFs SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA)

Daily Chart For Diamonds Courtesy of MetaStock Xenith

The daily chart clearly shows how Diamonds have been trading back and forth around my annual pivot of $246.52 since May 10. Note how the 200-day simple moving average is rising. It was $234.16 when tested on April 2 and is $240.26 now. Traders should buy Diamonds on weakness to my semiannual value level of $230.11 and reduce holdings on strength to my quarterly risky level of $252.89. My monthly risky level is $266.58 just above the all-time intraday high of $265.93 set on Jan. 26.

SPDR S&P 500 ETF Trust (NYSEARCA:SPY)

Daily Chart For Spiders Courtesy of MetaStock Xenith

The daily chart clearly shows that Spiders have been well above their semiannual pivot of $264.10 since May 4. A key buying opportunity was touted back on Feb. 9 when the ETF held its 200-day simple moving average then at $253.67. This average is now up to $263.64. Traders should buy Spiders on weakness to my semiannual pivot of $264.10 and reduce holdings on strength to my annual and quarterly risky levels of $276.34 and $276.99, respectively. My monthly risky level at $284.79 is below the all-time intraday high of $286.62 set on Jan. 26.

PowerShares QQQ Trust ETF (NASDAQ:QQQ)

Daily Chart For QQQ Courtesy of MetaStock Xenith

The daily chart clearly shows that the large momentum stocks are driving QQQs higher. The Nasdaq 100 ETF has stayed above its 200-day simple moving average now at $157.75. Traders should buy QQQs on weakness to my annual and semiannual pivots of $156.14 and $154.54, respectively, and reduce holdings on strength to my monthly risky level for June at $179.19. QQQ’s has been above my quarterly pivot of $165.51 since May 7. The all-time intraday high of $175.21 was set on March 13.

iShares Transportation Average ETF (NYSEARCA:IYT)

Daily Chart For The Transports ETF Courtesy of MetaStock Xenith

The daily chart shows that transports have been trading back and forth around my quarterly pivot at $195.90 since May 21. The 200-day simple moving average was tested on May 3 when the average was $182.00. It’s now at $184.52. Traders should buy on weakness to my semiannual pivot of $188.79 and reduce holdings on strength to my monthly and annual risky levels at $199.30 and $204.61, respectively, which was tested at the Jan. 16 all-time intraday high of $206.73.

iShares Russell 2000 ETF (NYSEARCA:IWM)

Daily Chart For The Russell 2000 ETF Courtesy of MetaStock Xenith

The daily chart shows that the small cap ETF set another all-time intraday high of $164.39 on May 30. The 200-day simple moving average was last tested on April 2 when the average was $147.92. This average is now $151.44. Traders should buy IWM on weakness to my monthly and semiannual value levels of $161.32 and $144.99, respectively, and to ‘sell strength’ to reduce holdings on strength to my annual and quarterly risky levels of $165.04 and $168.65, respectively.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.