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Mish Schneider What can ETFs reveal about the market?

In this article, Mish Schneider, director of trading research and education at MarketGauge.com, highlights some of the indices and ETFs to keep an eye on.

Recently we talked about the iShares Transportation Average ETF [IYT] and the SPDR S&P Retail ETF [XRT] as indicators for market strength/weakness.

Transportation shows the movement of goods and travel expectations, while retail shows the consumer sentiment side.

Both help us understand investor expectations of the economy reopening and therefore help us understand if we are in a risk on/off environment.

The strength has clearly been noted with IYT breaking to new highs, and XRT sitting close to all-time highs at $99.

Most of the indices have picked up on these clues too, with three of the four major indices breaking to new highs this past week.

However, the Nasdaq 100 (represented by the Invesco QQQ ETF [QQQ]) tested its 50-day moving average (DMA), but was unable to clear its resistance level at $320.39.

Additionally, the S&P 500 (represented by the SPDR S&P 500 ETF [SPY]) was able to break all-time highs but could not hold them.

This means that on Monday, we should watch for follow-through from these two indices as this could be a short-term pivotal area to clear.

While the market continues to push a bullish bias, one thing that has jolted investors is the 10-year treasury yield increasing over 1.60%.

If yields continued to move higher, this could lead investors to worry about rising inflation.

Luckily, we have a special ETF that helps gauge investors’ risk appetite: The SPDR Bloomberg Barclays High Yield Bond ETF [JNK].

Currently it has been consolidating underneath resistance from the 50-DMA at $108.29.

If investors get spooked, watch for this to break down. Conversely, if JNK clears its 50-DMA and holds, the market along with investors should be appeased for the moment.

This article was originally published on MarketGauge. With over 100 years of combined market experience, MarketGauge's experts provide strategic information to help you achieve your investing goals.

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