ChartAdvisor for Aug. 1, 2014

By Justin Kuepper | August 04, 2014 AAA

Major U.S. indices moved sharply lower last week, despite signs of an improving economy. According to the Department of Commerce, economic growth accelerated at a faster pace than expected (4%) during the second quarter. The Bureau of Labor Statistics’ jobs report also showed that the economy added 200,000 or more jobs for the sixth consecutive month, slightly below expectations.

International markets followed U.S. markets lower with the exception of certain Asian economies. Japan’s Nikkei 225 rose 0.45%; Germany’s DAX 30 fell 4.5%; and, Britain’s FTSE 100 fell 1.73% last week. In Europe, inflation fell to its lowest levels since the height of the financial crisis entering a “danger zone”. In Asia, China reported a rebound in manufacturing activity as global trade starts to revive. (For the previous week's ChartAdvisor, click here.)

The SPDR S&P 500 (SPY) ETF fell 2.58% lower last week. After breaking down through trendline support, the index moved below its 50-day moving average at 195.06 and towards its S1 support at 191.02. Traders should watch for an extended move downwards towards S2 support at 188.95 or a rebound to re-test its 50-day moving average and pivot point at around 195.06. Looking at technical indicators, the RSI appears oversold at 34.48 but the MACD remains bearish. (For related reading, see: A Primer on the MACD.)

The SPDR Dow Jones Industrial Average (DIA) ETF fell 2.61% lower last week. After breaking down through its trend line support and 50-day moving average at 168.22, the index moved near its S1 support at 163.34. Traders should watch for a breakdown from these levels towards its 200-day moving average and S2 support around 161.39 or a rebound back towards its 167.24 pivot point. Looking at technical indicators, the RSI appears oversold at 30.02 but the MACD remains in a bearish downtrend. (For related reading, see: Support and Resistance Basics.)

The PowerShares QQQ (QQQ) ETF fell 2.12% lower last week. After breaking down from its trend line support, the index reached towards its 50-day moving average at around 93.72. Traders should watch for a breakdown from these levels towards S2 support at 91.51 or a rebound to re-test R1 resistance at 97.14. Looking at technical indicators, the RSI appears neutral at 46.36 but the MACD recently experienced a bearish crossover. (For related reading, see: An Introduction to the Relative Strength Index.)

The iShares Russell 2000 (IWM) ETF fell 2.6% lower last week. After breaking below its 200-day moving average at 113.03, the index moved a bit closer to its trend line and S1 support at 107.99. Traders should watch for a move down to that S1 support and lower trend line level or a rebound higher to re-test its 200-day moving average levels. Looking at technical indicators, the RSI appears oversold at 33.40, but the MACD appears in a bearish downtrend. (For related reading, see: Bullish and Bearish MACD Crossovers.)

Summary

The major U.S. indices moved lower last week, despite an improvement in the U.S. economy. Next week, traders will be watching a number of key economic events, including international trade data on Aug. 6 and jobless claims on Aug. 7. Traders will also be keeping a watch on a struggling Eurozone economy and potential policy changes in the U.S.

Charts courtesy of StockCharts.com.

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