The major U.S. indices moved lower this week, after Wal-Mart (NYSE: WMT) cut its yearly profit forecast and the U.S. Federal Reserve indicated tapering could begin as early as next month. With market valuations just coming off of all-time highs, investors are becoming increasingly worried that corporate profits could fall later this year, while the Federal Reserve has become increasingly hard to read as Ben Bernanke prepares to step down in January.

Foreign markets fared marginally better than domestic markets. Germany’s DAX 30 jumped 0.6%, Britain’s FTSE 100 fell 1.3%, and Japan’s Nikkei 225 rose 0.3% this week. Markets in the eurozone were boosted after the region emerged from its nearly two-year recession, while China’s reported data manipulation led to some confusion over its growth rates. But overall, traders in both markets remain very cautious given the uncertain environment.

SEE: Financial Statement Manipulation An Ever-Present Problem For Investors

The SPDR S&P 500 (ARCA: SPY) ETF fell 1.7% this week, as of mid-day trading on Friday afternoon. After reaching new highs earlier this month, the index fell to its 50-day moving average of 165.64 and pivot point at 166.29, which lies just above its lower trend line at around 164.60. Traders should watch for a rebound from this trend line towards R1 resistance at 172.31 or a breakdown to S1 support at 162.67. Looking at technical indicators, the RSI has moved into oversold levels, while the MACD remains in a bearish downwards trend.



The PowerShares QQQ (Nasdaq: QQQ) ETF fell 1.0% this week, as of mid-day trading on Friday afternoon. After reaching new highs earlier this month, the index moved lower this week to just above its pivot point of 74.44 and its upper trend line and R1 resistance at 77.54. Traders should watch for a break down to the lower trend line and S1 support at 72.68 or a rebound higher to retest the upper trend line and R1 resistance. Looking at technical indicators, the RSI remains neutral with a 51.74 reading, while the MACD remains in a bearish downtrend.



SEE: Using Trading Indicators Effectively

The SPDR Dow Jones Industrial Average (ARCA: DIA) ETF fell 2.1% this week, as of mid-day trading on Friday afternoon. After reaching new highs earlier this month, the index fell sharply below its 152.07 pivot point and 152.40 50-day moving average to test S1 and lower trend line support at 149.92. Traders should watch for a rebound from this level back to its 50-day moving average or pivot point or a break down to the S2 support level at 145.00. Looking at technical indicators, the RSI appears oversold, while the MACD remains in a bearish downtrend.



The iShares Russell 2000 Index (ARCA: IWM) ETF fell 1.8% this week, as of mid-day trading on Friday afternoon. After reaching new 52-week highs earlier this month, the index moved down to its pivot point at 102.16 and just above its 50-day moving average of 101.20. Traders should watch for a breakdown to the lower trend line and S1 support at 98.92 or a rebound back to tests R1 resistance and an upper trend line at 106.69. Looking at technical indicators, the RSI remains neutral with a 44.27 reading, while the MACD remains in a bearish downtrend.



SEE: Battered Stocks That Bounce Back

The Bottom Line
The major U.S. indices moved lower this week, led by the Dow Jones and S&P 500 indices that encompass industrials and broad market segments. With Wal-Mart’s warning and potential Federal Reserve tapering, downside pressure is likely to remain in the market for the time being. Traders will also be closely watching a number of economic indicators next week, including existing home sales and FOMC minutes on August 21st, jobless claims on August 22nd, and new home sales data on August 23rd.

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.

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