The major U.S. indices moved marginally higher this week, led by technology stocks and lagged by small-cap stocks. While the government shutdown made economic reports somewhat difficult to interpret, this week’s jobs report served as a reminder that the U.S. economy has a long road to recovery. The U.S. economy added 148,000 jobs in September and unemployment fell to 7.2%, but the labor force participation rate dropped again to levels last seen in the 1970s. But with the Federal Reserve prepared to keep rates low until at least 2014, many investors are looking forward to ongoing growth in corporate profits into next year.

Foreign markets were a little more mixed this week. Japan’s Nikkei 225 fell 3.25%, Britain’s FTSE 100 improved 1.48%, and Germany’s DAX 30 jumped 1.27%. While the eurozone has been showing signs of improvement, persistent unemployment has left it in much the same position as the United States. Asia isn’t faring much better either after the World Bank cut its forecast for growth in the region to 7.1% this year and 7.2% next year. These rates are down from prior forecasts of 7.6% growth this year and 7.8% next year.

The SPDR S&P 500 (ARCA:SPY) ETF rose 0.52% this week, as of early trading on Friday morning. After moving past its R1 resistance at 172.88, the index reached its upper trend line at around 176.00, below its R2 resistance at 177.74. Traders should watch for a breakout from these levels to the R2 resistance or a move back down to the R1 resistance next week. Looking at technical indicators, the RSI appears overbought at 66.60, suggesting possible profit taking, but the MACD remains firmly in a bullish up-trend that just barely appears to be moderating.

The PowerShares QQQ (NASDAQ:QQQ) ETF rose 0.95% this week, as of early trading on Friday morning. After jumping past its upper trend line at around 81.50, the index passed through R2 resistance at 82.14 to reach new all-time highs. Traders should watch for an extended rally towards the 90.00 mark or a retracement back to the R2 resistance to consolidate. Looking at technical indicators, the RSI appears overbought at 70.59 and poised for some consolidation, although the MACD continues to show a bullish trend firmly in place.

The SPDR Dow Jones Industrial Average (ARCA:DIA) ETF rose 0.83% this week, as of early trading on Friday morning. After extending its rally higher this week, the index lies just below R1 resistance at 155.89 and above its pivot point and 50-day moving average at around 151.25. Traders will be watching for a move past the R1 resistance to the upper trend line at around 158.00 on the upside or some consolidation above the support levels. Looking at technical indicators, the RSI appears only modestly overbought and the MCAD remains in an uptrend.

The iShares Russell 2000 Index (ARCA:IWM) ETF rose 0.28% this week, as of early trading on Friday morning. After moving past its R1 resistance at 109.44, the index is trading just below its upper trend line and R2 resistance at 112.27. Traders should watch for a breakout from these levels to set new highs or some consolidation within this channel. Looking at technical indicators, the RSI is modestly overbought with a reading of 66.04, while the MACD remains firmly in a bullish uptrend since the middle of this month.

The Bottom Line

The major U.S. indices moved higher this week, but remain below key breakout levels with mixed technical indicators. Next week, traders will be looking towards a number of reports to guide future direction, including the FOMC Minutes on October 30th that are expected to be a non-event, Jobless Claims on October 31st detailing employment improvements, and the ISM Manufacturing Index on November 1st, providing insights into a key job creator.

Charts courtesy of StockCharts.com.

Related Articles
  1. Mutual Funds & ETFs

    7 Best ETF Trading Strategies for Beginners

    Exchange-traded funds are ideal instruments for beginning traders and investors. Learn the seven best strategies for trading ETFs.
  2. Charts & Patterns

    Understand How Square Works before the IPO

    Square is reported to have filed for an IPO. For interested investors wondering how the company makes money, Investopedia takes a look at its business.
  3. Trading Strategies

    Who Actually Trades or Invests In Penny Stocks?

    Although penny stocks are highly speculative, millions of people trade them daily. Here are 10 different types who do.
  4. Chart Advisor

    4 Stocks Still Flashing Buy Signals

    In the midst of volatility and a big market sell-off last week, these stocks are flashing buy signals.
  5. Mutual Funds & ETFs

    ETF Analysis: SPDR Dow Jones International RelEst

    Learn how the SPDR Dow Jones International Real Estate exchange-traded fund (ETF) is managed and for whom the ETF is most appropriate.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares JPMorgan USD Emerg Markets Bond

    Learn about the iShares JPMorgan USD Emerging Markets Bond fund, which invests in bonds of sovereign and quasi-sovereign entities from emerging markets.
  7. Active Trading Fundamentals

    How Hedge Funds Front-Run Index Funds to Profit

    Understand what front running is, and learn how hedge funds use this investing strategy to profit from the anticipated stock buys of index funds.
  8. Mutual Funds & ETFs

    ETN Analysis: Rogers Intl Commodity Energy Total Return

    Learn more about the Rogers International Commodity Total Return, which is an exchange-traded note that tracks a broad index of commodity futures.
  9. Mutual Funds & ETFs

    ETF Analysis: Schwab US Large-Cap

    Discover how the Schwab U.S. Large-Cap exchange-traded fund is managed, the index it tracks and the investors for which it is most appropriate.
  10. Technical Indicators

    Understanding Trend Analysis

    Trend analysis is the use of past performance to predict future price movement of a security.
RELATED TERMS
  1. Exchange-Traded Fund (ETF)

    A security that tracks an index, a commodity or a basket of assets ...
  2. Exchange-Traded Mutual Funds (ETMF)

    Investopedia explains the definition of exchange-traded mutual ...
  3. Fintech

    Fintech is a portmanteau of financial technology that describes ...
  4. Indicator

    Indicators are statistics used to measure current conditions ...
  5. Intraday Momentum Index (IMI)

    A technical indicator that combines aspects of candlestick analysis ...
  6. Fractal Markets Hypothesis (FMH)

    An alternative investment theory to Efficient Market Hypothesis ...
RELATED FAQS
  1. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  2. What does a high turnover ratio signify for an investment fund?

    If an investment fund has a high turnover ratio, it indicates it replaces most or all of its holdings over a one-year period. ... Read Full Answer >>
  3. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>
  4. What is the difference between passive and active asset management?

    Asset management utilizes two main investment strategies that can be used to generate returns: active asset management and ... Read Full Answer >>
  5. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
  6. Is there a situation in which wash trading is legal?

    Wash trading, the intentional practice of manipulating a stock's activity level to deceive other investors, is not a legal ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!