Market Summary for Oct. 12, 2012
The United States markets moved lower this week, despite some positive economic news. Jobless claims fell to 339,000, which was lower than the 370,000 figure that economists forecasted. But instead of a boost, the markets proved to be a bit more skeptical this time around, as the improvement could be attributed to more unemployed giving up on their job search entirely.
Global markets were likely responsible for most of the decline in the U.S. Optimism surround the ECB's unlimited debt buying program appears to have waned, while the IMF issued a stern warning that sent markets lower, saying that austerity is not the answer. In Asia, the World Bank didn't help things either, saying that the region's economies won't grow as much as expected.
These concerns about Asian growth and uncertainty in Europe were the primary drivers of this week's decline in U.S. stocks.
The S&P 500's SPDR (ARCA:SPY) exchange traded fund (ETF) stands at a critical turning point at the lower end of its channel and at the $142.83 50-day moving average. A rebound from this support level could spell a buying opportunity for traders, but a breakdown could see a move down to a prior high of around $139.20 or a move all the way down to its 200-day moving average at $135.90.
The index's moving average convergence divergence (MACD) and relative strength index (RSI) indicators are both in downward trends with no current signs of a reversal. Traders should watch for a MACD crossover to signal a potential bounce from the lower trend line, while a strongly oversold RSI could signal a coming break in the downtrend.
SEE: Trading The MACD Divergence
The Dow Jones Industrial Average SPDR (ARCA:DIA) ETF remains in a similar position to the SPY index ETF, but may have already breached its lower trendline after a possible double top, suggesting a significantly more bearish outlook. The move below the support at around $134 occurred at a high volume, while the stock now rests near its $132.77 50-day moving average.
Like the SPY index ETF, the MACD and RSI indicators are both moving in bearish directions, although the RSI could soon indicate an oversold environment. Traders should watch for a bullish MACD crossover, as well as a bounce off of the 50-day moving average that could signal a false breakout from the lower trendline, although a bearish scenario seems more likely.
SEE: Momentum And The Relative Strength Index
The PowerShares QQQ (Nasdaq:QQQ) ETF broke through its 50-day moving average support at around $68.17 on a high volume and now rests near a key Fibonacci level that could provide a base of support at around $66.44. A break below that level could see a move down to prior highs and the 50% Fibonacci level at around $65.17 or a move to its 200-day moving average.
As with the SPY and DIA indexes, the MACD and RSI indicators are both moving in bearish directions, while the RSI could soon move into oversold territory. Traders should watch for a bullish MACD crossover to signal a bounce from the current support, but a bearish scenario seems more likely at the moment with a possible move down to $65.17.
The iShares Russell 2000 Index (ARCA:IWM) ETF appears to be in better shape than the other major indexes, trading above its lower trend line and roughly at its 50-day moving average of $82.34. Traders will be watching to see if the very robust looking lower support level holds, and if so, may consider taking a position in the ETF to capitalize on the bounce from the support.
As with the other indexes, the MACD and RSI indicators seem to be predominantly negative at the moment. Traders should watch for oversold conditions in the RSI and a MACD bullish crossover before initiating a bullish position in the index, while a breakdown of the lower support level could result in a retracement all the way down to the 200-day moving average at $79.52.
SEE: Retracement Or Reversal: Know The Difference
The Bottom Line
The major U.S. indexes have moved lower over the past week as a result of negative news out of Asia and the European Union. While some employment figures have been positive, the market is awaiting confirmation of a jobs recovery before becoming too bullish. As a result, traders should watch for industrial production and jobless claims data closely next week.
Charts courtesy of StockCharts.com.
At the time of writing, Justin Kuepper did not own any shares in any company mentioned in this article.
Global markets were likely responsible for most of the decline in the U.S. Optimism surround the ECB's unlimited debt buying program appears to have waned, while the IMF issued a stern warning that sent markets lower, saying that austerity is not the answer. In Asia, the World Bank didn't help things either, saying that the region's economies won't grow as much as expected.
These concerns about Asian growth and uncertainty in Europe were the primary drivers of this week's decline in U.S. stocks.
The S&P 500's SPDR (ARCA:SPY) exchange traded fund (ETF) stands at a critical turning point at the lower end of its channel and at the $142.83 50-day moving average. A rebound from this support level could spell a buying opportunity for traders, but a breakdown could see a move down to a prior high of around $139.20 or a move all the way down to its 200-day moving average at $135.90.
The index's moving average convergence divergence (MACD) and relative strength index (RSI) indicators are both in downward trends with no current signs of a reversal. Traders should watch for a MACD crossover to signal a potential bounce from the lower trend line, while a strongly oversold RSI could signal a coming break in the downtrend.
SEE: Trading The MACD Divergence
Like the SPY index ETF, the MACD and RSI indicators are both moving in bearish directions, although the RSI could soon indicate an oversold environment. Traders should watch for a bullish MACD crossover, as well as a bounce off of the 50-day moving average that could signal a false breakout from the lower trendline, although a bearish scenario seems more likely.
As with the SPY and DIA indexes, the MACD and RSI indicators are both moving in bearish directions, while the RSI could soon move into oversold territory. Traders should watch for a bullish MACD crossover to signal a bounce from the current support, but a bearish scenario seems more likely at the moment with a possible move down to $65.17.
As with the other indexes, the MACD and RSI indicators seem to be predominantly negative at the moment. Traders should watch for oversold conditions in the RSI and a MACD bullish crossover before initiating a bullish position in the index, while a breakdown of the lower support level could result in a retracement all the way down to the 200-day moving average at $79.52.
SEE: Retracement Or Reversal: Know The Difference
The major U.S. indexes have moved lower over the past week as a result of negative news out of Asia and the European Union. While some employment figures have been positive, the market is awaiting confirmation of a jobs recovery before becoming too bullish. As a result, traders should watch for industrial production and jobless claims data closely next week.
Charts courtesy of StockCharts.com.
At the time of writing, Justin Kuepper did not own any shares in any company mentioned in this article.
by
Justin Kuepper
Justin Kuepper has many years of experience in the market as an active trader and a personal retirement accounts manager. He spent a few years independently building and managing financial portals before obtaining his current position with Accelerized New Media, owner of SECFilings.com, ExecutiveDisclosure.com and other popular financial portals. Kuepper continues to write on a freelance basis, covering both finance and technology topics.
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