After a holiday-shortened, rowdy week, let’s look at a few top stock trades involving some of the most well-followed names on Wall Street.
Top Stock Trades for Monday No. 1: S&P 500 ETF (SPY)
The Fed announced an additional $2.3 trillion worth of stimulus and the S&P 500 can barely gain upward traction? That’s a potential warning sign in my view. Some could argue that another worse-than-expected jobless claims report soured sentiment, but it didn’t matter the last two weeks — so I wouldn’t put much emphasis on it now. Certainly any stimulus with a “T” following the figure should overshadow it.
I enjoy rallies as much as the next guy and certainly lean bullish over the long term, but I am taking this recent rebound with a grain of salt. The SPDR S&P 500 ETF (NYSEARCA:SPY) has now rallied almost 25% from its lows — a rather astounding move in itself.
The ETF is now coming into the 50% retracement for its 2020 range, as it has retraced half of this massive decline. From here, bulls need to see the SPY push through this mark, putting the 50-day moving average in play. Believe it or not, SPX 3,000 is only about 7.5% above current levels.
On the downside, see how the stock does on a test of the $274 level. That doesn’t give much cushion on the downside, so a move below it isn’t the end of the world. However, it does put the 38.2% retracement in play, at $264.40. Below that and a test of the mid-$240s may be on the table.
Keep in mind, the largest three holdings in the ETF are Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT) and Amazon (NASDAQ:AMZN). All three struggled on the day, and closed level for the most part.
Top Stock Trades for Monday No. 2: PowerShares QQQ ETF (QQQ)
The Nasdaq Composite lagged the S&P 500 all day, which was noteworthy, as the Nasdaq has been a leader. You can see that the PowerShares QQQ ETF (NASDAQ:QQQ) is also struggling with the 50% retracement.
On a slight dip, I want to see how the stock does with the $195 breakout level. Just below is the 38.2% retracement, near $192.60, along with the 10-day and 20-day moving averages. However, a drop below that could put the 23.6% retracement in play, near $182.
On the upside, see if the QQQ can reclaim the 50-day moving average. Above that puts the 61.8% retracement near $210 in play.
Keep in mind, Apple, Microsoft and Amazon are also the top three holdings for the QQQ.
Top Stock Trades for Monday No. 3: Russell Small Caps ETF (IWM)
The iShares Russell 2000 ETF (NYSEARCA:IWM) hasn’t retraced nearly as much of this decline as the larger indices have. The IWM is being rejected from the 38.2% retracement on Friday. That’s despite the ETF rallying more than its peers in the stock market, up more than 5.5% at one point.
A move over $124 puts the 50% retracement near $133 on the table. If it can’t, look for a pullback down to the 10-day and 20-day moving averages. The 23.6% retracement near $113.50 may be in play in a correction, as well.
Since the IWM has had the weakest rebound of the bunch, keep an eye on this one should the markets correct this month. Below $104 puts a retest of the lows on the table. On the plus side, the IWM hammered out a really good-looking bottom at $96.
Top Stock Trades for Monday No. 4: Gold ETF (GLD)
Finally, the SPDR Gold Trust ETF (NYSEARCA:GLD) is performing well, and who can be surprised as the Fed puts the printing press on overtime?
The sharp decline in March is being met with an equally sharp rebound, as the GLD pushes up into $160 resistance. This mark has been resistance since February, and a breakout could easily put $165 to $170 in play.
If GLD can breakout, see that $160 acts as support on a pullback. Long-term, it’s hard not to like gold given the Fed’s actions, however necessary. But that starts with a move over resistance. If the GLD can’t push through resistance, see that it holds up over the 10-day moving average. Below puts $150 in play.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell did not hold a position in any of the aforementioned securities.