ChartAdvisor for Aug. 8, 2014

By Justin Kuepper | August 11, 2014 AAA

Major U.S. indices moved higher over the past week, led by small-cap stocks and lagged by technology stocks. U.S. services sector activity hit an eight-and-a-half year high as factory orders surged in June, suggesting solid economic growth during the third quarter of the year (For more, see: Economic Indicators: Factory Orders Report). Some economists and ratings agencies like S&P remain concerned over the country’s long-term health, however, given the widening wealth gap that has complicated the rebound from the Great Recession.

International markets didn’t fare quite as well as the United States over the past week. Japan’s Nikkei 225 fell sharply by 4.77%; Britain’s FTSE 100 fell 1.63%; and Germany’s DAX 30 fell 2.18% last week. In Europe, Italy’s return to a recession sparked fears about the durability of the region’s recovery. In Asia, investors grew concerned over the fact that Japan’s economy may have shrank during the second quarter, although policymakers aren’t expected to change anything. (For more, see: ChartAdvisor for Aug. 1, 2014.)

The SPDR S&P 500 (SPY) ETF rose 0.36% over the past week. After falling below its 50-day moving average, the index stabilized around its S1 support at 191.02 before moving slightly higher towards its pivot point. Traders should watch for a breakout from its pivot point at 195.04 or a breakdown below S1 support towards its lower trend line and S2 support at 188.95. Looking at technical indicators, the RSI appears neutral but the MACD remains very bearish. (For more, see: Interpreting Support and Resistance Zones.)

SPY, neutral RSI, bearish MACD

The SPDR Dow Jones Industrial Average (DIA) ETF rose 0.39% over the past week. After falling below its lower trend line, the index stabilized around its S1 support at 163.34 and moved marginally higher last week. Traders should watch for a breakout above its pivot point at 167.24 or a breakdown below its S1 support at 163.34. Looking at technical indicators, the RSI rebounded to neutral levels but the MACD remains in a strong bearish downtrend.

DIA, neutral RSI, bearish MACD

The PowerShares QQQ (QQQ) ETF rose 0.31% over the past week. After falling below its lower trend line, the index has stabilized around its 50-day moving average at 94.17 and above its S1 support at 93.26. Traders should watch for a breakdown below these levels to trend line and S2 support at around 91.51 or a breakout higher towards its prior support trend line. Looking at technical indicators, the RSI remains neutral but the MACD is in a bearish downtrend.

QQQ, neutral RSI, bearish MACD

The iShares Russell 2000 (IWM) ETF rose 1.51% over the past week. After falling below its 200-day moving average at 113.10, the index recovered much of the lost ground over the past week. Traders should watch for a breakout above that level towards its pivot point at 114.25 or a move down to test its lower trend line and S1 support at 107.99. Looking at technical indicators, the RSI appears neutral and the MACD remains in a bearish downtrend, although it may crossover soon. (For more, see: Bullish and Bearish MACD Crossovers.)

IWM, neutral RSI, bearish MACD

Summary

The major U.S. indices moved higher over the past week in spite of the weakness in international equity markets. Next week, traders will be watching for a number of key economic indicators, including retail sales on Aug. 13, jobless claims on Aug. 14, and PPI/industrial production data on Aug. 15. (For more, see: What Is The Relationship Between The PPI and the CPI?)

Charts courtesy of StockCharts.com.

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