Major U.S. indices moved sharply higher this week due to positive signals from the Federal Reserve concerning its tapering and manufacturing activity that grew at its fastest pace since May of 2010. Weak housing and retail sales have been largely ignored due to the severe winter weather, although these are certainly risks that investors should consider. The comeback in equities also comes after a recent move lower.
International markets moved largely higher with the exception of some European markets. Japan's Nikkei 225 jumped 3.86%; Britain's FTSE 100 jumped 2.47%, Germany's DAX 30 fell 0.48% this past week. In Asia, investors are concerned about China's slowing manufacturing and Japan's growing trade deficit. In Europe, slowing business activity indicators have damped equities along with the unfavorable Asian data.
The SPDR S&P 500 (ARCA:SPY) ETF rose 2.52% this past week as of early trading on Friday morning. After rebounding past its 50-day moving average at 181.31, the index moved up towards its prior highs at around 185.00. Traders should watch for a breakout from these levels to R2 resistance at 188.06 or a move back down to its pivot point at around 180.00. Looking at technical indicators, the RSI is overbought at 61.30 but the MACD remains in a robust bullish uptrend.
The SPDR Dow Jones Industrial Average (ARCA:DIA) ETF rose 2.00% this past week as of early trading on Friday morning. After rebounding from its pivot point at 158.82, the index moved closer towards R1 resistance at 162.22. Traders should watch for a breakout from these levels towards its prior highs at around 165.00 or a move lower to its pivot point levels. Looking at technical indicators, the RSI appears modestly overbought at 57.93 although the MACD remains in a bullish uptrend.
The PowerShares QQQ (NASDAQ:QQQ) ETF rose 3.35% this past week as of early trading on Friday morning. After breaking through its prior highs at R1 resistance at 88.59, the index moved towards its R2 resistance at 90.92. Traders should watch for a breakout from these levels towards its upper trend line or a move lower towards its R1 support or even its 50-day moving average at around 87.10. Looking at technical indicators, the RSI appears overbought at 65.39 while the MACD remains in a bullish uptrend suggesting an ongoing move higher.
The iShares Russell 2000 (NYSE:IWM) ETF rose 4.24% this past week as of early trading on Friday morning. After breaking out from its pivot point and 50-day moving average at around 113.32, the index moved towards its R1 resistance at 116.01 and prior highs at around 118.00. Traders should watch for a breakout from these levels towards its R2 resistance at 119.87 or a move lower to retest its pivot point or S1 support and lower trend line at 109.66. Looking at technical indicators, the RSI appears modestly overbought at 59.92 and the MACD remains in an uptrend.
The major U.S. indices moved higher this past week, although their RSI levels appear to be approaching overbought levels. Traders will be watching a number of key economic indicators next week, including new home sales on February 26th, durable goods and jobless claims on February 27th, and GDP data on February 28th. Of course, any comments out of the Federal Reserve will also be closely monitored by the markets.
Charts courtesy of StockCharts.com.