The U.S. markets consolidated this week, moving modestly lower across the board. While the move was hardly a surprise given the recent run-up, concerns are mounting over Cyprus and the intensifying situation in the European Union. A failure to resolve those issues could spill over into the U.S. by slowing down growth prospects that have already been hurt by the sequestration and automatic spending cuts set to go into effect soon.

Global markets were largely muted as well, due to the increasing concern in the euro zone. Japan’s Nikkei 225 jumped nearly 0.50%, thanks to the ongoing devaluation of its currency, while the Hang Seng fell over 1.8% on growth concerns in China. In Europe, Germany’s DAX fell over 1.5% and Britain’s FTSE fell nearly 1.3% on concerns about the Cyprus situation.

The S&P 500 SPDR (NYSE:SPY) ETF moved 0.37% lower by mid-day trading on Friday afternoon, making it the best performing of the U.S. indices. Currently, the index is trading between prior highs of 156.00 on the upside and prior highs of 152.90 on the downside, and roughly at its R2 pivot point resistance level at 155.07. The modest retracement this week helped to moderate the RSI, which fell to 60.18 from prior readings of around 70.00, but the MACD indicator still suggests a bearish downward pattern. As a result, traders should watch for a breakout of the two key levels mentioned above on high volume to gain some certainty of direction.

SEE: Technical Analysis: Support And Resistance

SPY bearish

The Dow Jones Industrial Average SPDR (ARCA:DIA) ETF moved 0.52% lower by mid-day trading on Friday afternoon, placing it second in performance among major indices. Currently, the index is trading in the middle of a range, with trend line support at around 141.51 and trend line resistance at around 146.50, but above its R2 pivot point resistance at 143.14. Despite the sideways trading this week, the RSI indicator suggests that it may still be overbought with a reading of 66.68, while the MACD indicator suggests a potential bearish downturn. As a result, traders should watch for a potential breakdown to lower support levels.

SEE: Momentum And The Relative Strength Index

DIA bearish

The PowerShares QQQ (Nasdaq:QQQ) ETF moved 0.57% lower by mid-day trading on Friday afternoon, placing it in the middle of the major U.S. indices. Currently, the index trades within a rising wedge pattern, with an upper resistance trend line at around 69.50 and a lower support trend line at 68.10, recently bouncing off of its R1 pivot point support at 68.10. While the rising wedge pattern suggests a bearish reversal, technical indicators remain inconclusive, with a neutral RSI reading of 54.72 and a MACD that may crossover but hasn’t yet.

QQQ bearish

The iShares Russell 2000 Index (ARCA:IWM) ETF moved 0.76% lower by mid-day trading on Friday afternoon, making it the worst performer among the major U.S. indices. Currently, the index trades above the convergence of two key support trend lines at around 92.50, but just below its R2 pivot point resistance at 94.54. As with many of the other major indices, technical indicators are relatively inconclusive, with a modestly overbought RSI of 60.79 and a MACD reading that suggests a crossover may occur but hasn’t yet. As a result, traders should watch to see if this key resistance level holds over the coming week.

SEE: Trading The MACD Divergence

IWM bearish

The Bottom Line
U.S. indices consolidated this week and trading action next week will largely depend on resolving the Cyprus situation in the eurozone. Traders will also be watching Durable Goods Orders and New Home Sales on March 26th, GDP and Jobless Claims on March 28th, and Personal Income and Outlays on March 29th for clues about the health of the economy moving forward.

Charts courtesy of StockCharts.com

At the time of writing, Justin Kuepper did not own any shares in any company mentioned in this article.

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