The U.S. markets moved largely higher this week, bolstered by higher-than-expected consumer spending, faster-than-expected employment growth, an ongoing rebound in the housing market and ongoing bullish momentum. With the Russell 2000 leading the group with a 1.18% gain, the Dow Jones followed with a 0.70% gain, the S&P 500 jumped 0.32% and the NASDAQ fell by a modest 0.23% for the week, as of mid-session on Friday afternoon.
Global markets followed the U.S. markets higher, for the most part. Japan’s Nikkei 225 rose 2.26% on the week, strengthened by a weaker yen and favorable new BOJ leadership. Germany’s DAX rose 0.5% and Britain’s FTSE 100 etched out a 0.7% gain, despite some negative economic news out of the eurozone and Britain over the past week. And China’s Xinhua 25 extended its move lower as investors continue to sell Chinese stocks.
The S&P 500 SPDR (ARCA:SPY) ETF moved 0.32% higher this week, but looks to close on a bearish note as traders take profit off the table and ETFs show outflows. Hovering around its R2 pivot point resistance at 155.76, the index could break lower to its R1 pivot point support level and trend line support at around 153.60. With a high RSI reading of around 65.04 and a potential bearish MACD crossover in the works, traders may want to watch for consolidation at this 155.76 level before another move higher materializes over the coming weeks.
SEE: Technical Analysis: Support And Resistance
The Dow Jones Industrial Average SPDR (ARCA:DIA) ETF moved 0.70% higher this week, but looks to close on a bearish note alongside the other major U.S. indexes. After breaking through its R2 pivot point resistance level at 143.44, the index appears to be moving back down to those levels. Traders should watch for a break of this level down to R1 pivot point support at 141.86 or even down to its 139.73 pivot point and key trend line support, given its overbought RSI reading of 71.84 and a potential bearish MACD crossover in the works.
SEE: Momentum And The Relative Strength Index
The PowerShares QQQ (Nasdaq:QQQ) ETF extended its move downward this week, with a 0.23% loss compared to gains across other U.S. indexes. After breaking through R1 pivot point resistance at 68.25, the index has flat lined over the past couple weeks on relatively low volume by historical standards. Traders should watch for a break down below this 68.25 level or a break up through the R2 pivot point resistance at 69.41. But long term, the index remains range-bound in a channel with a 70.00 upper limit and a 67.40 lower limit.
The iShares Russell 2000 Index (ARCA:IWM) ETF led the other major indexes with a solid 1.18% rise, extending a robust rally that began in mid-November of last year. Edging above its R2 pivot point resistance at 94.54, traders will be watching for this level to hold or a potential consolidation down to key support at a major trend line and R1 pivot point support at 92.51. RSI readings of around 72.39 suggest that such a consolidation is a good possibility, but the MACD remains in what appears to be a very robust bullish up-trend.
SEE: Support & Resistance Basics
The Bottom Line
U.S. indices moved largely higher this week due to strong economic data and momentum, but traders should be mindful of potential downside. Many ETFs are beginning to see strong outflows, suggesting that investors are locking in profits, while increases in government spending from the sequestration could put a halt to some growth. Looking ahead, traders will be watching housing starts data on March 19 and existing home sales and jobless claims on March 21 for clues about the future direction of the market.
Charts courtesy of stockcharts.com
At the time of writing, Justin Kuepper did not own any shares in any company mentioned in this article.