The major U.S. indices moved higher this week led by the Dow Jones Industrial Average, despite mixed retail sales data and a critical U.S. Federal Reserve meeting next week. Many economists remain bullish on U.S. economic growth after August’s ISM manufacturing survey showed the fastest growth in two years, since these figures are strongly correlated with changes in GDP and the manufacturing sector is known for generating more jobs than other sectors.

Foreign markets followed the U.S. indices higher amid bullish news in the U.S. and eurozone, with Japan’s Nikkei 225 jumping 3.9%, Britain’s FTSE 100 jumping 0.3%, and Germany’s DAX 30 jumping about 2.5% this past week. While eurozone employment fell during the second quarter, the fall occurred at a slower pace suggesting improvements are being made. The region still faces a number of bearish trends, however, including its lackluster factory output for July.

The SPDR S&P 500 (ARCA:SPY) ETF rose 1.76% this past week, as of early trading on Friday. After rebounding above its 50-day moving average of 167.40, the index trades just above its resistance of 168.73 and within a well defined price channel. Traders should watch for a move to its upper trend line and resistance at 173.81 on the upside or down to the lower trend line and support at 160.81. Looking at technical indicators, the RSI remains modestly oversold at 61.10 while the MACD recently experienced a bullish crossover.

The PowerShares QQQ (NASDAQ:QQQ) ETF rose 1.13% this past week, as of early trading on Friday. After breaking out above resistance at 76.85, the index reached its resistance at 78.22 and remains within its price channel. Traders should watch for a breakout from the resistance and upper trend line on the upside or watch for a move down to the pivot point and 50-day moving average at 75.83 on the downside. Looking at technical indicators, the RSI is modestly overbought at 62.92 and the MACD crossed over to the upside.

The SPDR Dow Jones Industrial Average (ARCA:DIA) ETF rose 2.85% this past week, as of early trading on Friday. After breaking out from its pivot point at 150.35, the index moved up to its resistance at 153.34 before taking a break. Traders should watch for an extended move up to its upper trend line at 158.00 or a move back down to the pivot point or lower trend line at around 148.00. Looking at technical indicators, the RSI appears overbought at 64.83, while the MACD experienced a strong bullish crossover that suggest additional upside.

The iShares Russell 2000 Index (ARCA:IWM) ETF rose 1.86% this past week, as of early trading on Friday morning. After breaking out above its pivot point at 102.08 and resistance at 103.93, the index continues to trade near the middle of its price channel. Traders should watch for a move higher to the resistance at 107.47 or a move lower to support and lower trend line support at 98.54. Looking at technical indicators, the RSI remains neutral at 58.66 and the MACD recently experienced a bullish crossover that suggests further upside.

The Bottom Line

The major U.S. indices moved higher this week ahead of key U.S. Federal Reserve comments due out next week regarding the tapering of its bond buying program. Traders should keep an eye on key RSI levels that appear modestly overbought, but the overall trend appears to be bullish judging by all of the favorable MACD crossovers. Next week, traders will be watching a number of economic indicators, including industrial production on the 16th, CPI data on the 17th, housing and Fed data on the 18th, and jobless claims and home sales on the 19th.

Charts courtesy of StockCharts.com.

Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.

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