Tickers in this Article: SPY, IWM, QQQ, DIA
The major U.S. indices moved modestly higher during the shortened week, led by small-cap and technology stocks. Consumer spending fell 0.2% in April, which led to some profit taking, as economists had projected a 0.1% gain last month. But, the lower-than-expected inflation suggest that the U.S. Federal Reserve may have trouble winding down its bond-buying programs in the near-term, which could lead to less weight on equities in the future.

Japan’s Nikkei continues to dominate foreign headlines, falling more than 5% this week amid concerns about Abenomics. Britain’s FTSE fell more than 2% during the week, while Germany’s DAX picked up some slack with a modest 0.5% gain. Hong Kong’s Hang Seng also fell 1% over the course of the week, amid ongoing concerns about China’s economic health. Looking ahead, traders will be closely watching Japan’s next move and for changes in the eurozone’s outlook.

The SPDR S&P 500 (ARCA:SPY) ETF rose 0.23%, as of mid-day trading on Friday afternoon. Currently, the index trades in the middle of a long-term price channel and above its R2 pivot point resistance at 163.82. Traders should watch for the two key trend lines at the 200-day moving average of about 160.00 on the downside and around 170.00 on the upside. Looking at the MACD indicator, the index remains in a bearish downtrend that could make the 160.00 scenario more likely, while the RSI indicator is modestly overbought at 61.08. (For more, check out A Primer On The MACD)



The PowerShares QQQ (NASDAQ:QQQ) ETF rose 0.8%, as of mid-day trading on Friday afternoon. Currently, the index is trading above a lower trend line support of 72.00 and R2 pivot point resistance of 73.29. Traders should watch for either a move back down to the 72.00 level or a move higher past its 52-week highs. Looking at the technical indicators, both the MACD and the RSI suggest that the index will remain in a bearish downtrend, but an emerging pennant pattern could suggest a continuation of the current uptrend.



The SPDR Dow Jones Industrial Average (ARCA:DIA) ETF rose 0.25%, as of mid-day trading on Friday afternoon. Currently, the index remains in the middle of a price channel and above its R2 pivot point resistance of 150.99. Traders should watch for a break of this price channel at around 151.00 on the downside and 157.00 on the upside. Meanwhile, the MACD and RSI are both suggesting a bearish downtrend, with a crossover in the former and an overbought reading of 66.32 in the latter.



The iShares Russell 2000 Index (ARCA: IWM) ETF rose 0.94%, as of mid-day trading on Friday afternoon. Currently, the index remains within a price channel and just above its R2 pivot point resistance of 98.05. Traders should watch for a breakout above 101.00 or a breakdown below the lower trend line and pivot point resistance of 92.60. Looking at the technical indicators, the MACD appears ready to make a bearish crossover, while the RSI remains modestly overbought with a reading of 62.57.



The Bottom Line
The major U.S. indices moved modestly higher this week, but technical patterns still suggest a bearish downturn on the horizon. Next week, traders will be closely watching numerous economic indicators, including the U.S. ISM Manufacturing Index data on June 3rd, International Trade data on June 4th, Jobless Claims on June 6th, and Employment Data on June 7th. While the country has posted favorable data lately, there are many hurdles ahead that could quickly derail the recovery and send the major indices lower.

Charts courtesy of StockCharts.com.

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