Are Safe Haven U.S. Indices Prepping for a Breakout?

Tuesday’s gains on thin volume do little to inspire enthusiasm

As the chart from StockCharts.com demonstrates, the major stock indices remain rangebound after Tuesday’s rally.  Despite Tuesday’s bump, the S&P 500 ETF (NYSEARCA:SPY) remains below its 50-day moving average.  At its current level of 133.12, it is 4 points below the 50-day moving average, mid-way above the 200-day moving average, riding almost directly mid-range.  Although the Relative Strength Index has nudged upward, it remains below 50 and should not motivate anyone from the sidelines to get bullish.  It is also noteworthy that Tuesday’s advance came on thin volume, detracting from the significance of the move.

The only conclusion to be drawn from this chart is that the “sell” signal got kicked down the road (for now).

Investing Insights to Explore: ETF Trading Signals>>

A look at the chart for the Russell 2000 ETF (NYSEARCA:IWM), tells a more bearish story.  Although IWM is making a good recovery from last week’s fall to its January level, the gains were made on thin volume, which was significantly weaker than the volume during last week’s selloff.  Although the MACD is creeping upwards from last Monday’s depths, it is still at a bearish level.  Although its relative strength is up a tad, it remains at a dismal 40.81.  Most significantly, the “head and shoulders” pattern on this chart remains unbroken and will stay that way until the share value breaks above 79.

The chart for the Dow Jones SPDR ETF (NYSEARCA:DIA) is giving a  “sell” signal from the moving average convergence standpoint, with thin volume accompanying Tuesday’s advance.  This fund backed away from its 11:00 peak of 125.92, to flop and chop just above 125.  Its current level is so far below its early-may level of 132, that a break to the downside appears risky.

As of  Tuesday, the S&P 500 ETF (NYSEARCA:SPY) is the only one of these three funds which is not giving a strong “sell” signal.  The Russell 2000 ETF (NYSEARCA:IWM) has “sell me” written all over it.

John Nyaradi is the author of The ETF Investing Premium Newsletter.