The major U.S. indices moved lower this week, led by small-cap stocks in the Russell 2000 index, after consumer spending and inflation weighed on the market. With recent data suggesting that the economy lost some of its steam in early Q3 2013, the Federal Reserve is expected to revisit its plans to stop bond-buying programs. Meanwhile, consumer confidence slipped to 82.1 in August from 85.1 in July, signaling worries about higher interest rates and slower growth.
SEE: Why The Consumer Confidence Report Is Useful
Foreign markets followed the U.S. market lower across the board. Britain’s FTSE 100 fell 1.34%, Germany’s DAX 30 fell 3.45%, and Japan’s Nikkei 225 fell 1.99%, as of mid-day trading on Friday afternoon. With unemployment remaining steady at 12.1% and morale slowly climbing, traders are beginning to shift money back into the eurozone economies. Meanwhile, Japanese inflation figures suggest that Shinzo Abe’s plans are beginning to gain traction in Asia.
The SPDR S&P 500 (ARCA: SPY) ETF fell 1.73%, as of mid-day trading on Friday afternoon. After falling below its 50-day moving average at 166.08, the index stabilized just above its S1 support at 162.67 this week. Traders should watch for a move down to its lower trend line at around 159.00 or a move higher its upper trend line and R1 resistance at 172.31. While the RSI remains oversold at 38.34, the MACD remains in a decidedly bearish downtrend, signaling that the stock could continue to experience downwards pressure into next week.
The PowerShares QQQ (NASDAQ: QQQ) ETF fell 1.79%, as of mid-day trading on Friday afternoon. After moving down off of its R1 resistance at 77.54, the index stabilized just above its 50-day moving average at 74.69 and pivot point at 74.44. Traders should watch for a rebound from these levels to re-test the R1 resistance or a move lower to the lower trend line and S1 support at around 72.68. With the RSI in neutral territory at 48.80, the MACD remains in a downtrend, predicting an ongoing bearish environment for the time being.
SEE: Adaptive Price Zone Technical Indicator Explained
The SPDR Dow Jones Industrial Average (ARCA: DIA) ETF fell 1.35%, as of mid-day trading on Friday afternoon. After breaking down below its 50-day moving average at 151.73, the index remains just above its lower trend line at about 146.50 in consolidation mode. Traders should watch for a rebound from this level to the 50-day moving average or a break down to its 200-day moving average at 142.78. With the RSI standing at very oversold levels of 31.77 and the MACD bottoming out in its bearish downtrend, bullish trends may be on the horizon.
The iShares Russell 2000 Index (ARCA: IWM) ETF fell 2.2%, as of mid-day trading on Friday afternoon. After moving off of its highs of around 106.00, the index moved down below its 101.95 pivot point and 101.87 50-day moving average. Traders should watch for a rebound from its S1 support at 98.92 back up to its R1 resistance at 106.69 or a move lower to S2 support at 94.18. While the RSI remains neutral at 43.09, the MACD is in a bearish downtrend that could suggest ongoing weakness into next week.
SEE: Battered Stocks That Bounce Back
The Bottom Line
The major U.S. indices moved lower this week, but remain within long-term price channels. Traders should watch for breakouts or breakdowns from these price channels for the best opportunities, while keeping an eye on macroeconomic news behind such moves. Looking into the shortened coming week, traders will be watching ISM manufacturing data on September 3rd, U.S. jobless claims on September 5th, and employment data on September 6th.
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.