On Friday, June 1, the last primary support level in the S&P 500 was broken. This means the uptrend that began in October of last year is officially over This means the uptrend which began in October of last year, is officially over. All the major index ETFs followed suit, putting in lower intra-day lows on Friday than those seen on prior (recent) declines. The longer-term trend that began in 2009 is still up and in no danger at this time, but there is no question the short-term outlook is bearish. It is possible the intra-day break below support on Friday could turn into a false breakout; therefore, there are important levels to watch in each of these ETFs.
SEE: Support And Resistance Reversals
The S&P 500 SPDRS (ARCA: SPY) broke below two important levels on Friday (June 1). The first level was the May 18 low at $129.55. The break below this level signifies there is still significant weakness in this market at the current time and downward momentum is continuing. The second important level that was breached is the October 27 high. This former resistance level, now support, should have been able to hold off selling. The fact it could mean there may be a larger decline underway. The next downside target is at $126 followed by $122, if the former target is breached. Resistance is now at $134, and a move above that level would negate some of the bears and could even trigger a bear trap rally.
The Dow Jones Industrial Average SPDR (ARCA: DIA) also broke below two important levels. The decline below the May 23 low at $122.82 signals this current down move is going to continue. The October 27 high at $122.58 was also pierced on Friday. This breakdown of support has bearish implications, and provides further downside targets of $120, followed by $116 if the former is breached. If the ETF can climb back above $126, it could bring in additional buying, although until that occurs, further downside is more likely.
SEE: Interpreting Support And Resistance Zones
PowerShares QQQ ETF (Nasdaq: QQQ), representing the Nasdaq 100 index, also looks like it will be continuing to the downside. On June 1, the ETF moved below the May 18 low at $60.76. Even with the relatively sharp decline, this ETF has seen since the start of April, there is still support below though. The next support area is at $59, and this is also the next target, should the downward slide continue. The $59 mark is important because it was a resistance area back in October and November, and should now support declines. If it does not it provides a longer-term bearish signal. The next target would be at $56, should $59 be breached in the coming week(s). To ease downward pressure, the ETF will need to get back above $63.15. That could spark some buying interest again, but until that occurs, caution is warranted.
Russell 2000 iShares Index (ARCA: IWM) ETF, representing the Russell 2000 index, broke below the May 21 low at $74.41 on Friday (June 1), indicating there is still weakness in this ETF. The next downside target is $71, followed shortly by $70. This is an important support area because the long-term trendline, which began back in 2009, is currently intersecting right near $70. The short-term trend is down and that looks like it will continue. This ETF will need to get back above $78 in order to renew the hopes of the bulls. Unfortunately, there is very strong resistance at $78. Until that resistance level is broken, being short is likely preferable to being long.
SEE: The Pioneers Of Technical Analysis
The Bottom Line
June 1 finished off the week by piercing some important levels in all these ETFs. With support unable to hold, it looks the momentum is still continuing to the downside. There is support below, and for longer-term traders there is some solace in the fact that all these ETFs are still in long-term uptrends ... even though the short-term trend is down. As long as these ETFs remain below the resistance levels mentioned, the bears have control and the longs are at greater risk.
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At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.