The major U.S. indices moved higher this week, after U.S. lawmakers reached an agreement to extend the debt ceiling. While the agreement will only enable the U.S. Treasury to issue debt until February 7, 2013, a “default provision” section of the bill could give the President unilateral authority to increase debt unless a supermajority passed a new bill disagreeing. In the meantime, government services came back online and are returning to normalcy.
Foreign markets also moved higher on the news. Japan’s Nikkei 225 jumped 3.83%, Britain’s FTSE 100 jumped 2.01%, and Germany’s DAX 30 jumped 1.31%. In the eurozone, rising exports suggested an ongoing rebalancing, but inflation fell to a troublesome three and a half year low. In Asia, China reported accelerating growth that hit 7.8%, helping boost global growth, although investors remain concerned about its banking and credit systems.
The SPDR S&P 500 (ARCA:SPY) ETF rose 2.14% higher this week, as of early trading on Friday morning. After moving past its R1 resistance at 172.88, the index trades just below its upper trend line resistance and a ways below its R2 resistance at 177.74. Traders should watch for a breakout from this upper trend line or a move back down to solid support at around 167.00. Looking at technical indicators, the RSI appears modestly overbought at 64.51, while the MACD recently experienced a bullish crossover that’s worth watching closely.
The PowerShares QQQ (NASDAQ:QQQ) ETF rose 3.16% higher this week, as of early trading on Friday morning. After breaking through its upper trend line at around 81.00, the index now trades just below R2 resistance at 82.14. Traders should watch for a breakout from these levels to set new highs or a retest of the upper trend line and/or R1 resistance at 80.51. Looking at technical indicators, the RSI is approaching overbought levels with a reading of 68.26, while the MACD recently experienced a bullish crossover after a quick downtrend.
The SPDR Dow Jones Industrial Average (ARCA:DIA) ETF rose 0.75% higher this week, as of early trading on Friday morning. After moving past its 50-day moving average at 151.20, the index trades in the middle of a well-defined price channel. Traders should watch for a move higher to test the 158.00 upper trend line or a move lower to the 148.00 lower trend line. Looking at technical indicators, the RSI remains very neutral with a 55.56 reading, while the MACD just barely saw a bullish crossover that could suggest a move higher.
The iShares Russell 2000 Index (ARCA:IWM) ETF rose 2.23% higher this week, as of early trading on Friday morning. After breaking out from its upper trend line and R1 resistance at 109.44, the index trades just below R2 resistance at 112.27. Traders should watch for a move up to this level or a move back down to retest the upper trend line and R1 resistance. Looking at technical indicators the RSI appears to be approaching overbought levels at 65.42, while the MACD recently experienced a bullish crossover that could suggest a move higher.
The Bottom Line
The major U.S. indices moved largely higher this week due to the debt ceiling agreement, but technical indicators remain mixed, suggesting overbought movements but bullish trends. Looking forward, traders will be watching a number of economic indicators to guide future price direction next week, including existing home sales on October 21st, jobless claims and new home sales on October 24th, and durable goods orders on October 25th.
Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.