On Tuesday I suggested that the S&P 500 and Nasdaq could be trying to build bases to rally from, but let's face it, it's hard to get excited about a stock market that has been spinning its wheels for two weeks. The SPDR S&P 500 ETF (SPY) closed Wednesday's regular session a whopping 50 cents higher than where it closed on Dec. 16. The Invesco QQQ Trust (QQQ) obviously has underperformed relative to SPY, but still, the only thing the beaten-down tech ETF has done is slide back toward its channel low.
Because I'm looking for a reason to be bullish, or at least optimistic, I looked at the Invesco S&P 500 Equal Weight ETF (RSP) and the Direxion Nasdaq-100 Equal Weighted Index Shares Fund (QQQE) . In both cases, the equal-weighted ETFs are trading better than their traditionally weighted counterparts.
You can nitpick if you want and talk about how some of the names pushing the equal-weighted ETFs higher are the most beaten-down ones. But again, I'm simply looking for a reason to be optimistic.
The RSP, for example, closed above its short, intermediate and long-term moving averages on Wednesday, while the SPY is beneath all its moving averages except for a 10-day exponential moving average (EMA). And while the QQQE is still beneath its moving averages, it is worth noting that while the QQQ is bouncing around its bear market lows, QQQE is nearly 9% above its mid-October closing low.
I'd love to tell you that either SPY or QQQ is a screaming buy at current levels, but I can't. And while the equal-weighted ETFs make me think the underlying market isn't as weak as it appears, I'm not willing to make a move until the instrument I want to trade triggers one of my traditional buy signals. So, if you're looking at the S&P 500, you're looking for a close above 3,900. And if you're a glutton for punishment and stalking the Nasdaq Composite, your best bet may be to wait for an intraday break of 10,300 followed by a bullish reversal and close back above that level.
