Avoid the Growling Small Cap Bear -- Trade These ETFs

NEW YORK (TheStreet) -- When 2014 began, I described my value levels, pivots and risky levels as a "tangled bowl of spaghetti." Now at mid-May that description remains valid.

One of my predictions was that the five major equity averages would test their 200-day simple moving averages at some point during the year. The Dow Industrial Average (DIA) traded as low as 15,430 on Feb. 5, which was below its 200-day SMA. The S&P 500 (SPY) stayed above its 200-day so far this year. The Nasdaq (QQQ) stayed just above its 200-day at its year-to-date low at 3,946, set on April 15. The Dow Transportation Average (IYT) stayed well above its 200-day SMA year to date. The Russell 2000 (IWM) has been trading back and forth around its 200-day SMA since April 14 with that average now at 1,116.48.

At the beginning of the year we showed that the lowest semiannual value levels are 3,930 and 3,920 on the Nasdaq, which held at its April 15 low. The highest semiannual risky level is 16,860 on Dow Industrials, which has not yet been tested either despite a new all-time high this week.

Today we "crunch the numbers" for the five major averages to judge the potential outcome of the bull vs. bear debate. Check out the charts on page 2 before you make buy and sell decisions.


The Dow Industrial Average (16447) set an all-time intraday high at 16,735.51 on May 13, but is down 0.8% year to date. The Dow ended Thursday below its 21-day simple moving average at 16,517 on a negative daily chart. The weekly chart is positive, with its five-week modified moving average at 16,386. Semiannual and semiannual value levels are 16,245 and 14,835, respectively, with a quarterly pivot at 16,462 and weekly and semiannual risky levels at 16,715 and 16,860, respectively.

The S&P 500 (1870.85) set an all-time intraday high at 1,902.17 on May 13, and is up just 1.2% year to date. The S&P ended Thursday below its 21-day SMA at 1,877.7 on a negative daily chart. The weekly chart is positive, with its five-week MMA at 1,862.8. Quarterly and semiannual value levels are 1,853.5 and 1,764.4, respectively, with weekly and monthly risky levels at 1,885.8 and 2,006.7, respectively.

The Nasdaq  (4069.29) set a multiyear intraday high at 4,371.71 on March 7, as the momentum stock bubble began to pop. This index is down 2.6% year to date. The Nasdaq is below its 21-day and 50-day SMAs at 4,105 and 4,169, respectively, with the 200-day SMA at 4,000. The weekly chart is negative, with its five-week MMA at 4,109. Quarterly and semiannual value levels are 4,039 and 3,920, respectively, with a monthly risky level at 4,581.

The Dow Transportation Average (7781.32) set an all-time intraday high at 7,918.92 on May 13, and is up 5.1% year to date. Transports is above all key moving averages in the first table. The weekly chart is positive but overbought, with its five-week MMA at 7,614. Quarterly and semiannual value levels are 7,407 and 7,245, respectively, with a monthly risky level at 8,461.

Russell 2000 (1095.99) set an all-time intraday high at 1,212.82 on March 4, and is down 5.8% year to date. The small cap index is below all three key daily moving averages. The weekly chart is negative, with its five-week MMA at 1,127.25. Annual value levels are 966.72 and 879.39, with a weekly pivot at 1,088.49 and semiannual and quarterly risky levels at 1,133.29 and 1,169.22, respectively.

Check out the charts on page 2.

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