Recently, there’s been significant growth in the market, with several assets breaking previous records. Yet, two major market ETFs—the Ishares Russell 2000 ETF (IWM) and the SPDR Dow Jones Industrial Average ETF (DIA)—haven’t managed to break out of their long-term bullish patterns. It’s somewhat unusual to see both ETFs, which represent different market capitalization levels, not follow the typical trend of one leading while the other lags. Generally, you expect some movement or rotation between them. Both IWM and DIA are currently well above their lows from April last year, though they’ve been quite stagnant since late 2024. This reflects a notable bullish sentiment, but the two ETFs are configured very differently.
To understand what’s needed for both to officially break out, let’s examine IWM first. Its movements are heavily influenced by regional banks and biotechnology sectors. Regional banks tend to be value-focused and reactive to interest rates, while small biotechnology can be quite volatile. These sectors have faced substantial hurdles in recent years, but there are signs of recovery, particularly with the SPDR S&P Regional Banking ETF (KRE). It’s attempting to maintain a position above a multi-week bullish inverted cup and handle pattern. If it can uphold this level—roughly in the 60s—it could pave the way for a more substantial foundation moving into early 2022.
The SPDR S&P Biotech has also been trying to rally since March 2023, but earlier attempts have met resistance. Recently, however, there’s been a significant shift in momentum, especially since late 2024, leading up to the latest lows. The goal for XBI would be to establish higher lows above the midpoint of this large base after recent recoveries. Historically, if XBI drops below the ’80s, it usually triggers a more pronounced downward movement, as traders lose patience. Developing bullish patterns with higher highs and lows would be key, especially since its 14-day RSI is currently below 50. An upward trend here would be favorable—the RSI profile was notably strong in 2020 to early 2021.
In terms of larger ETFs, major tech players like Apple (AAPL) are crucial. Apple has been attempting to push through its bullish pattern, with its price action reflecting a solid demand near support levels established back in April 2021. If this trend continues, it could positively influence DIA as well. On the other hand, Salesforce (CRM) appears to lack a clear bullish pattern right now, although it’s returned close to significant support zones. There has been renewed demand since mid-2024, and if buyers step in again at these levels, CRM could regain its momentum, benefiting the ETF and potentially pushing it to new highs.
In summary, while these aren’t the only factors affecting market movements, they could be key drivers. If IWM and DIA can gain traction, they might even emerge as market leaders as trends evolve.
