The major U.S. indices moved higher this week, led by small-cap and technology stocks, as the Conference Board’s index of leading indicators rose 0.2% in October to 97.5. Recent gains in the index suggest that the U.S. economy could see stronger growth next year. U.S. building permits also hit a five-and-a-half year high in October, which suggests that the housing market may be poised to perform better-than-expected amid growing concerns last month.
International markets moved largely higher this week. Japan’s Nikkei 225 rose 1.82%; Britain’s FTSE 100 fell 0.36%; and, Germany’s DAX 30 rose 2.04%. In the eurozone, the Economic Sentiment Indicator showed an improvement in confidence, but persistent unemployment and low inflation remain concerns. In Asia, the recovery in the West has helped boost growth, but many countries in the region still lag behind bolder recoveries in the U.S. and Europe.
The SPDR S&P 500 (ARCA:SPY) ETF rose 0.87%, as of midday trading on Friday afternoon. After breaking above its upper trendline in late-October, the index is trading just above its R1 resistance at 180.69. Traders should watch for a move higher to R2 resistance at 185.59 or a move lower to retest its trendline support at around 177.50. Looking at technical indicators, the RSI appears overbought at 69.60 and the MACD remains flatlined at an elevated 1.946, suggesting that the index may be overdue for a retracement.
The SPDR Dow Jones Industrial Average (ARCA:DIA) ETF rose 1.27%, as of midday trading on Friday afternoon. After breaking above its upper trendline and R1 resistance in mid-November, the index is trading just below its R2 resistance at 162.75. Traders should watch for a move to test the R2 resistance on the upside or a move back down to the lower trendline and R1 resistance at 158.88 on the downside. Looking at technical indicators, the RSI appears overbought at 73.61 and the MACD remains in a slowing uptrend.
The PowerShares QQQ (NASDAQ:QQQ) ETF rose 2.16%, as of midday trading on Friday afternoon. After trading sideways through most of November, the index rose past its R1 resistance at 85.40 this week and is approaching its upper trendline at around 86.00. Traders should watch for a breakout from this trendline to its R2 resistance at 88.01 on the upside or a move lower to its 50-day moving average at 81.50 on the downside. Looking at technical indicators, the RSI appears overbought at 72.85 but the MACD crossed over to the upside.
The iShares Russell 2000 (NYSE:IWM) ETF rose 2.93%, as of midday trading on Friday afternoon. After moving past its R1 resistance at 112.87 this week, the index is trading just below its upper trendline resistance at around 115.00. Traders should watch for a breakout from this resistance to R2 resistance at 116.56 or a move lower to its 50-day moving average and lower trendline support at 108.99 on the downside. Looking at technical indicators, the RSI appears overbought at 69.92 but the MACD recently saw a bullish crossover.
The Bottom Line
The major U.S. indices moved higher into overbought territory this week, with the QQQ and IWM facing significant upper trendline resistance coming up. Next week, traders will be watching a number of economic indicators, including ISM Manufacturing on December 2nd, Home Sales data on December 4th, Jobless Claims and GDP on December 5th, and Employment Data on December 6th.
Charts courtesy of StockCharts.com.
At the time of writing, the author did not own shares of any company mentioned in this article.