Stock exchange traded funds snapped their four-day losing streak Tuesday but the rest of the week will determine whether the gains are a temporary bounce.
ETFs indexed to the closely followed S&P 500 fell below several key support levels on Monday, technical analysts said.
Monday’s breadth was also “decidedly negative” at nearly 4 to 1, on average trading volume, said David Chojnacki, market technician at Street One Financial.
The S&P 500 on Monday closed just below its 150-day moving average of 1288 and couldn’t hold a key Fibonacci level, he said. Also, the Nasdaq-100 violated its 150-day average and is in danger of failing below its 2007 high. PowerShares QQQ (NasdaqGM: QQQ) is a popular ETF tracking the Nasdaq-100.
“Short term bias continues to the downside as we were unable to hold key technical levels. Near term, technicals weakened as we fell through some key benchmarks,” Chojnacki wrote in a strategy note Tuesday. “The S&P 500 is poised to test the March low of 1256 (close) in the short term.”
Even though the index dropped below key technical levels on Monday, some analysts think it could be head fake.