Market Review For December 20, 2013

By Justin Kuepper | December 20, 2013 AAA

Major U.S. indices moved higher this week after government reports showed the economy grew at its fastest pace in almost two years during the third quarter of 2013. The favorable data led the U.S. Federal Reserve to reduce its $85 billion monthly bond purchases by $10 billion starting in January of 2014. Despite this modest amount of tapering, the central bank’s promise to keep interest rates low kept investors on the buy-side of the market this week.

International markets moved largely higher this week due to favorable economic news in the U.S. Japan’s Nikkei 225 jumped 3%; Britain’s FTSE 100 jumped 2.6%; and Germany’s DAX 30 jumped 4.4% this week. In Asia, Japan’s market remains one of the best performing in the region although analysts expect the region to slow next year. In Europe, business surveys revealed higher levels of confidence but the eurozone economy remains fragile.

The SPDR S&P 500 (ARCA:SPY) ETF jumped 2% higher this week as of early trading on Friday morning. After rebounding from its pivot point at 178.34, the index rose towards its upper trend line and R1 resistance at 182.73. Traders should watch for a breakout from this level to R2 resistance at 185.30 or a move back down to support at the pivot point level. Looking at technical indicators, the RSI appears moderately overbought at 63.78 although the MACD looks like it may see a bullish crossover in the near-term lending support to the upside.

The SPDR Dow Jones Industrial Average (ARCA:DIA) ETF jumped 3% higher this week as of early trading on Friday morning. After rebounding from its pivot point at 158.57, the index broke past its highs towards its R1 resistance at 162.94. Traders should watch for a breakout from this level to R2 resistance at 165.56 or a move back down to retest its prior high at around 161.00 or its pivot point level. Looking at technical indicators, the RSI is top-heavy at 67.68 but the MACD recently experienced a bullish crossover that could signal upside ahead.

The PowerShares QQQ (NASDAQ: QQQ) ETF jumped 2% higher this week as of early trading on Friday morning. After rebounding from the middle of its price channel, the index moved back towards its upper trend line and R1 resistance at 86.98. Traders should watch for a breakout from this level to R2 resistance at 88.50 or a move back down to its pivot point at 84.05 towards the middle of its channel. Looking at technical indicators, the RSI is overbought at 67.24 but the MACD looks like it could experience a bullish crossover in the near-term.

The iShares Russell 2000 (NYSE: IWM) ETF jumped 3.1% higher this week as of early trading on Friday morning. After moving back above its pivot point at 111.60, the index moved towards its upper trend line and R1 resistance at 116.07. Traders should watch for a breakout from this level to R2 resistance at 118.62 or a move down to the pivot point at 111.60. Looking at technical indicators, the RSI appears overbought with a reading of 61.34 although the MACD looks like it could experience a bullish crossover over the coming week.

Summary

The major U.S. indices moved higher this week, sending their RSI readings into overbought territory. However, the MACD indicators seem to be turning around along with the U.S. economy, signaling potential upside ahead. Traders will be watching a number of technical indicators next week, including personal incomes on December 23rd, durable goods and new home sales on December 24th, and jobless claims on December 26th.

Charts courtesy of StockCharts.com.

Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.

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