The major U.S. indices extended their move lower this week, albeit at a slower pace than last week’s declines. Improvements in housing and jobs markets helped partially offset weakness caused disappointing corporate earnings and bearish Federal Reserve comments. Interesting, consumer confidence has risen to recent highs, while the same consumers continue to constrain their spending, hurting retail sales in July ahead of the key back-to-school season.

Foreign markets moved largely lower during the week, too. Britain’s FTSE 100 is down 0.9%, Germany’s DAX 30 is down 0.5%, and Japan’s Nikkei 225 is down nearly 6%. The eurozone has shown signs of improvement, thanks to Germany’s robust growth, while China’s rising inflation has sparked hopes that its slowdown won’t be as slow as many economists projected. But, with many markets still at their highs, expectations may be too lofty to justify right now.

SEE: How To Profit From Inflation

The SPDR S&P 500 (ARCA:SPY) ETF fell 0.75% lower, as of early trading Friday morning. Currently, the index trades in a price channel with an upper 172.31 bound and lower 160.00 bound. Traders should watch for a break of this upper bound or a move down to the pivot point at 166.26 or 50-day moving average at 165.06. Looking at technical indicators, the RSI has moved off of its highs to 60.53, while the MACD has experienced a bearish crossover.



The PowerShares QQQ (NASDAQ:QQQ) ETF fell 0.15% lower, as of early trading Friday morning. Currently, the index remains in a price channel with an upper 77.54 bound and a lower 71.00 bound. Traders should watch for a breakout of this upper bound at the R1 resistance level or a move down to the 74.44 pivot point or 50-day moving average at 73.65. Looking at technical indicators, the RSI remains overbought at 65.85 and the MACD may be ready to crossover.



SEE: Trading With Support And Resistance

The SPDR Dow Jones Industrial Average (ARCA:DIA) ETF fell 0.80% lower, as of early trading Friday morning. Currently, the index trades between an upper trend line at about 156.50 and a lower trend line and S1 support at 149.92. Traders should watch for a breakout from the upper trend line or a move down to the 50-day moving average at 152.18. Looking at technical indicators, the RSI has come off of its highs to 52.74, but the MACD is in a bearish trend.



The iShares Russell 2000 Index (ARCA:IWM) ETF fell 0.7% lower, as of early trading Friday morning. Currently, the index trades between an upper trend line at about 106.69 and a lower trend line at about 98.50. Traders should watch for a break of this upper trend line and R1 resistance or a move down to the 101.95 pivot point or 100.40 50-day moving averages. Looking at technical indicators, the RSI stands at 58.43 and the MACD remains in a bearish pattern.



SEE: Tweezers Provide Short-Term Precision For Forex Traders

The Bottom Line
The major U.S. indices moved largely lower this week and appear to be in downward trends based on the MACD indicator, which means that traders should be cautious about entering long positions at these levels. Those with long positions may want to consider putting tight stops in place for protection against any downside over the coming weeks.

Next week, traders will be watching for a number of economic indicators, including retail sales on August 13th, PPI data on August 14th, jobless claims, CPI and industrial production data on August 15th, and housing starts data on August 16th. In particular, traders will be watching for any improvements to retail sales and ongoing improvements in jobless claims.

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

Charts courtesy of StockCharts.com.

Related Articles
  1. Investing Basics

    Economic Indicators That Do-It-Yourself Investors Should Know

    Understanding these investing tools will put the market in your hands.
  2. Active Trading

    Leading Economic Indicators Predict Market Trends

    Leading indicators help investors to predict and react to where the market is headed.
  3. Technical Indicators

    Using Technical Indicators To Develop Trading Strategies

    Unfortunately, there is no perfect investment strategy that will guarantee success, but you can find the indicators and strategies that will work best for your position.
  4. Markets

    A Guide To Conference Board Indicators

    Learn to put the CB data sets to trading use. Each chapter takes you through one of the board's benchmark indicators or surveys, their significance and their applications.
  5. Insurance

    Exploring Oscillators and Indicators

    Find out how to use these technical analysis building blocks.
  6. Retirement

    Economic Indicators To Know

    The economy has a large impact on the market. Learn how to interpret the most important reports.
  7. Active Trading Fundamentals

    Market Breadth: A Directory Of Internal Indicators

    Discover the indicators that measure the force of the bulls and bears, telling you what a simple price chart cannot.
  8. Trading Strategies

    Mastering Short-Term Trading

    The proper application of a few different tools can help a short-term trader succeed.
  9. Investing Basics

    Free Cash Flow Yield: A Fundamental Indicator

    Free cash flow can measure a business’s performance as if you’re looking at its net income line.
  10. Technical Indicators

    Four Commonly Used Indicators In Trend Trading

    No single indicator can punch a ticket to market riches, but here are four that remain popular among trend traders.
RELATED FAQS
  1. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  2. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  3. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  4. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  5. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  6. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center