The major U.S. indices moved lower this week, after the government shut down due to budget disagreements. While official government reports halted along with its shutdown, the ISM non-manufacturing index fell to a 3-month low of 54.4 shortly before the shutdown. Investors remain concerned that the shutdown will hurt confidence in the near-term, while a failure to make interest payments could jeopardize the national credit rating yet again.
Foreign markets followed domestic market lower this week. Japan’s Nikkei 225 fell 3.17%, Britain’s FTSE 100 fell 1.54%, and Germany’s DAX 30 fell 0.81% this week. While domestic confidence has been shaken, the eurozone reported a pickup in its service sector and retail sales, although unemployment remains stubbornly high at around 12%. In Japan, investors remain on edge regarding a proposed hike in sales tax, which could hurt consumption.
The SPDR S&P 500 (ARCA: SPY) ETF fell 0.98% this week, as of early trading on Friday morning. After reaching its upper trend line last month, the index fell to its 50-day moving average and pivot point at around 167.50. Traders should watch for a move down to its lower trend line at around 166.00 or a rebound higher to R1 resistance at 172.88 or its upper trend line. Looking at technical indicators, the RSI remains neutral with a reading of 49.55, while the MACD experienced a bearish crossover, suggesting further downside ahead.
The PowerShares QQQ (NASDAQ: QQQ) ETF fell 0.21% this week, as of early trading on Friday morning. After reaching a high earlier this month, the index fell marginally to near its pivot point at 77.91. Traders should watch for a break down to lower trend line at around 77.00 or a move higher to the upper trend line or R1 resistance at 80.51. Looking at technical indicators, the RSI remains marginally overbought with a reading of 59.77, while the MACD recently experienced a bearish crossover that could suggest some downside ahead.
The SPDR Dow Jones Industrial Average (ARCA: DIA) ETF fell 2.04% this week, as of early trading on Friday morning. After moving off of its upper trend line in mid-September, the index fell below its 50-day moving average and pivot point to near its lower trend line. Traders should watch for a move down to this lower trend line at around 148.00 or a rebound to R1 resistance at 156.06 or the upper trend line marginally higher. Looking at technical indicators, the RSI appears modestly oversold at 40.84, while the MACD is in a bearish down trend.
The iShares Russell 2000 Index (ARCA: IWM) ETF fell 0.41% this week, as of early trading on Friday morning. Currently, the index is trading sideways within a channel with an upper trend line at the R2 resistance of 112.27 and a lower trend line at around 104.00. Traders should watch for a move to either of these levels, while taking note of the 50-day moving average at 104.01, which adds support to the downside. Looking at technical indicators, the RSI remains slightly overbought at 58.90 and the MACD recently crossed over to the downside.
The Bottom Line
The major U.S. indices moved largely lower this week, driven by the ongoing government shutdown and potential missed interest payment ahead. After experiencing bearish MACD crossovers, many of these indices appear headed for further weakness. Next week, traders will be watching for a number of government reports (if available), including FOMC Minutes on October 9th, jobless claims on October 10th, and retail sales and PPI data on October 11th.
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.