The U.S. economy showed ongoing signs of struggle, with trade and labor data painting a bleak picture this week. Rising imports and falling exports led to a wider trade deficit and paved the way for a decline in third quarter gross domestic product. Unemployment claims for the week ended November 2nd also came in higher than expected, suggesting that the labor market wasn’t quite recovering as quickly as many had hoped. Despite these bearish undertones, equities moved higher this week after the Federal Reserve promised ongoing stimulus.

International markets moved largely higher this week. Japan’s Nikkei 225 rose 7.7%; Britain’s FTSE 100 fell 0.39%; and, Germany’s DAX 30 rose 0.91%. Japan’s Nikkei 225 was the primary focus for traders this week, hitting a 6-month high amid a weakening Japanese yen and bullish comments from the U.S. Federal Reserve. In the European Union, third quarter data appears to be pointing towards more disappointment with an unexpected fall in French output and ongoing high unemployment, high inflation, and disagreements among leaders about how to deal with it.

The SPDR S&P 500 (ARCA:SPY) ETF rose 1.3% this week, as of early trading on Friday morning. After breaking through its first upper trend line resistance at 176.00, the index reached a second trend line resistance point at around 180.00. Traders should watch for a move down from these levels to 176.00 trend line support or a breakout higher to R1 resistance at 180.69. Looking at technical indicators, the RSI appears to be overbought with a reading of 67.68 and the MACD remains indecisively sideways, suggesting downside potential ahead.

The SPDR Dow Jones Industrial Average (ARCA:DIA) ETF rose 0.8% this week, as of early trading on Friday morning. After breaking through its upper trend line resistance at around 157.75, the index trades just below its R1 resistance at 159.17. Traders should watch for a move lower to retest the trend line at 157.75 or a move higher to R2 resistance at 163.06. Looking at technical indicators, the RSI appears overbought with a reading of 67.78 and the MACD appears in a bullish uptrend, although it appears to be moderating.

The PowerShares QQQ (NASDAQ:QQQ) ETF rose 1.5% this week, as of early trading on Friday morning. After rebounding higher this week, the index remains within its price channel with an upper bound at R1 resistance of 85.40 and a lower bound at the pivot point of 80.88. Traders should watch for a move to either of these levels over the coming week. Looking at technical indicators, the RSI appears overbought at 66.52 although the MACD looks as though it could see a bullish crossover over the coming week, signaling upside ahead.

The iShares Russell 2000 (NYSE:IWM) ETF rose 1.0% this week, as of early trading on Friday morning. After moving marginally higher this week, the index remains within its price channel with an upper bound at R1 resistance of 112.87 and a lower bound at the pivot point of 107.94. Traders should watch for a move to either of these levels over the coming week. Unlike the other indices, IWM’s RSI appears to be neutral at 56.77 and its MACD could be ready for a bullish crossover, suggesting potential upside over the coming weeks.

Summary

The major U.S. indices moved higher this week amid bullish comments from the U.S. Federal Reserve, although the weak economy could limit upside. Many of the indices appear to be overbought, judging by their RSI indicator, with the exception of small-cap stocks. Next week, traders will be looking towards a number of key economic reports for guidance, including inflation data, retail sales, home sales, and FOMC minutes on November 20th, as well as producer prices, jobless claims, and Fed survey data on November 21st.

Charts courtesy of StockCharts.com.

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