How to Trade 5 Major Equity Averages on Positive Weekly Charts - TheStreet

The five major U.S. equity averages ended last week with positive weekly charts, with two becoming overbought. The quick rebounds off last Monday's low indicated that there would be enough strength during the week to avoid negative weekly charts.

There's a technical reason for the fourth quarter rally that led to recent highs -- rising weekly momentum. That began shortly after the lows of Aug. 24. Last week's highs were not highs for the quarter, and the averages are between their most recent all-time highs and their 2015 lows.

This makes it extremely important to track the up and down volatility using Fibonacci Retracements, which differ among the averages.

Here's this weekly scorecard: 

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The Dow Jones Industrial AverageI:DJI closed at 17,823.81 on Friday, up 9.5% so far in the fourth quarter and flat year to date. It is 2.9% below its all-time high of 18,351.35, set on May 19. Monday's low was a test of the 61.8% Fibonacci Retracement from the all-time high to the 2015 low of 15,370.33, set on Aug. 24.

The S&P 500 I:GSPC closed at 2,089.17 on Friday, up 8.8% so far in the fourth quarter and up 1.5% year to date. It is 2.1% below its all-time high of 2,134.72, set on May 20. Monday's low was below its 61.8% retracement of 2032.5. The 2015 low of 1,867.01 was set on Aug. 24.

The Nasdaq CompositeI:IXIC closed at 5,104.92 on Friday, up 10.5% so far in the fourth quarter and up 7.8% year to date. It is 2.4% below its all-time high of 5,231.94, set on July 20. This index opened last Monday below its 200-day simple moving average of 4,963.63, but closed above it. The low was above its 61.8% retracement of 4,874.30. The 2015 low was 4,292.14, set on Aug. 24.

The Dow Jones Transportation AverageI:DJT closed at 8,301.80 on Friday, up 6.6% so far in the fourth quarter, but down 9.2% year to date. It is still in correction territory -- 10.8% below its all-time high of 9,310.33, set on Nov. 28, 2014. Transports stayed above its 23.6% retracement of 7,890.32, crossed the 38.2% retracement of 8,161.30, but stayed below its 50% retracement of 8,380.32. It is below its 200-day simple moving average of 8,408.22. The 2015 low of 7,452.70 was set on Aug. 24.

The Russell 2000 closed at 1,175.15 on Friday, up 6.8% so far in the fourth quarter and down 2.5% year to date. It is 9.3% below its all-time high of 1,296.00, set on June 23. Last Monday's open was below its 50-day simple moving average of 1,155.96, and below the 38.2% retracement of 1,161.59. By Wednesday, the small-cap index was above these levels but the week's high was well below the 50% retracement of 1,187.32. The 2015 low of 1,078.63 was set on Sept. 29.

Here's the daily chart and how to trade the Dow 30 using the SPDR Dow Jones Industrial Average ETF (DIA) - Get Report , a.k.a. Diamonds.


Courtesy of MetaStock Xenith

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Diamonds had a close of $178.06 on Friday, up 9.5% so far in the fourth quarter and up just 0.1% year to date. It is 2.9% below its all-time intraday high of $183.35, set on May 20.

The daily chart shows the ETF above its 200-day simple moving average of $175.78 and above its 61.8% retracement of $170.82. Note that last week's high was below the prior high of $179.60, set on Nov. 3, the fourth-quarter high to date.

Investors looking to buy Diamonds should place a good-till-canceled limit order to buy the ETF if it drops to $167.52, which is a key level on technical charts until the end of November.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the ETF if it rises to $185.55, which is a key level on technical charts until the end of this week.

Here's the daily chart and how to trade the S&P 500 using the SPDR S&P 500 ETF Trust (SPY) - Get Report , a.k.a. Spiders.


Courtesy of MetaStock Xenith

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Spiders had a close of $209.31 on Friday up 9.2% so far in the fourth quarter and up 1.8% year to date. The ETF is 2.1% below its all-time intraday high of $213.78 on May 20.

The daily chart shows the ETF above its 200-day simple moving average of $206.58 and above its 61.8% retracement of $201.79. Note that last week's high was below the prior high of $209.97, set on Nov. 3, the fourth-quarter high to date.

Investors looking to buy Spiders should place a good-till-canceled limit order to buy the ETF if it drops to $199.85, which is a key level on technical charts for the month of November.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the ETF if it rises to $215.18, which is a key level on technical charts until the end of 2015.

Here's the daily chart and how to trade the PowerShares QQQ Trust ETF (QQQ) - Get Report , known as QQQs.


Courtesy of MetaStock Xenith

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QQQs had a close of $114.48 on Friday, up 12.5% so far in the fourth quarter and up 10.9% year to date, after setting an all-time high of $115.47 on Nov. 11.

The daily chart shows the ETF above its 50-day and 200-day simple moving averages of $108.75 and $108.32, respectively. Note that last week's high was below the prior high of $115.47, set on Nov. 11, the fourth-quarter high to date.

Investors looking to buy QQQs should place a good-till-canceled limit order to buy the ETF if it drops to $110.87, which is a key level on technical charts until the end of 2015.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the ETF if it rises to $118.40, which is a key level on technical charts until the end of 2015.

Here's the daily chart and how to trade Dow Transports using the iShares Transportation Average ETF (IYT) - Get Report , a.k.a. Transports.


Courtesy of MetaStock Xenith

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Transports had a close of $149.47 on Friday, up 6.8% so far in the fourth quarter and down 8.9% year to date. It is still in correction territory -- 10.9% below its all-time intraday high of $167.80, set on Nov. 28, 2014.

The daily chart shows the ETF above its 50% retracement of $148.01, but below its 200-day simple moving average of $150.96. Note that last week's high was below the prior high of $151.01 set on Nov. 11, the fourth-quarter high to date.

Investors looking to buy Transports should place a good-till-canceled limit order to buy the ETF if it drops to $146.02, which is a key level on technical charts until the end of this week.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the ETF if it rises to the 200-day simple moving average of 150.96.

Here's the daily chart and how to trade small-caps using the iShares Russell 2000 ETF (IWM) - Get Report .


Courtesy of MetaStock Xenith

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The small-cap ETF had a close of $116.81 on Friday up 7% so far in the fourth quarter and down 2.3% year to date. It is 9.5% below its all-time intraday high of $129.10, set on June 24.

The daily chart shows the ETF between its 38.2% retracement of $115.42 and its 50% retracement of $118.04. The ETF is between its 50-day simple moving average of $114.87 and its 200-day simple moving average of $120.72. Note that last week's high was below the prior high of $119.36, set on Nov. 6, the fourth-quarter high to date.

Investors looking to buy the small-cap ETF should place a good-till-canceled limit order to buy the ETF if it drops to $113.56, which is a key level on technical charts until the end of this week.

A key level of $115.72 remains in play until the end of November.

Investors looking to reduce holdings should place a good-till-canceled limit order to sell the ETF if it rises to $126.08, which is a key level on technical charts until the end of 2015.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.