ChartAdvisor for Aug. 22, 2014

By Justin Kuepper | August 22, 2014 AAA

Major U.S. indices moved higher over the past week led by the Dow Jones Industrial Average as of Thursday’s close. In July, the Conference Board’s index of leading indicators rose 0.9% for the sixth straight month, signaling that the economic recovery remains on track. The biggest sources of strength were the financials, falling applications for unemployment benefits, and a rise in building permits, although economists remain concerned about the unemployment rate.

International markets also moved higher over the past week as of Thursday’s close. Japan’s Nikkei 225 rose 1.79%; Germany’s DAX 30 rose 1.91%; and Britain’s FTSE 100 rose 1.3%. German stocks rebounded as Ukrainian concerns subsided, although French manufacturing declined and job creation remains a key concern. In Asia, investors grew concerned over soft readings of manufacturing activity in both China and Japan during August. (For more, see: ChartAdvisor for Aug. 15.)

The SPDR S&P 500 (SPY) ETF rose 1.94% over the past week, as of Thursday’s close. After rising past its R1 resistance at 197.11, the index moved closer to retest its prior highs and R2 resistance at around 201.13. Traders should watch for a breakout from these levels or a move back down to R1 resistance or the 50-day moving average at 195.87. Looking at technical indicators, the RSI appears lofty at 65.61, but the MACD remains in a bullish trend after its crossover.

SPY lofty RSI, bullish MACD

The SPDR Dow Jones Industrial Average (DIA) ETF rose 2.29% over the past week, as of Thursday’s close. After moving past its R1 resistance at 168.89, the index moved to retest its prior highs of around 170.50. Traders should watch for a breakout from these levels towards its upper trend line and R2 resistance at 172.78 or a move back down to R1 resistance at 168.89. Looking at technical indicators, the RSI appears overbought at 64.01, but the MACD remains in a bullish uptrend. (For more, see: A Primer On The MACD.)

DIA, RSI overbought, bullish MACD

The PowerShares QQQ (QQQ) ETF rose 1.54% over the past week, as of Thursday’s close. After breaking past its prior highs and R1 resistance at 97.14, the index moved towards its upper trend line and R2 resistance at 99.27. Traders should watch for a breakout from these levels to new highs or a break down to retest its R1 resistance or lower trend line support before a move up. Looking at technical indicators, the RSI appears overbought at 71.16 while the MACD remains in a bullish uptrend. (For more, see: An Introduction To The Relative Strength Index.)

QQQ, RSI overbought, bullish MACD

The iShares Russell 2000 (IWM) ETF rose 1.59% over the past week, as of Thursday’s close. After briefly breaking through the pivot point at 114.25, the index has treaded water around the 50-day moving average at 114.98. Traders should watch for a breakout to the R1 resistance at 117.45 or a retracement back down to its lower trend line and S1 support at 107.99. Looking at technical indicators, the RSI is relatively neutral and the MACD remains in a bullish uptrend. (For more, see: Retracement or Reversal: Know The Difference.)

IWM, neutral RSI, bullish MACD

The Bottom Line

Positive economic news propped up the major U.S. indices over the past week as of Thursday’s close. Next week, traders will be watching a number of key economic indicators including new home sales on Aug. 25, durable goods orders on Aug. 26, GDP and jobless claims on Aug. 28, and personal income and outlays Aug. 29. (For more, see: Leading Economic Indicators Predict Market Trends.)

Charts courtesy of StockCharts.com.

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