International markets followed these movements for the most part, with the exception of some Asian markets that moved lower towards the end of the week. A notable exception was Japan's stock market, which saw equities rally amid the weaker yen. The lower yen valuation following the new prime minister's election promises to make the country's exports more attractive.
SEE: What Japan's General Elections Could Mean For The Yen
The S&P 500 SPDR (ARCA:SPY) ETF moved sharply higher this week, after the U.S. managed to avoid the "fiscal cliff." Currently, the index is trading at around 146 near prior highs dating back to September and October 2012. If the ETF breaks out higher, traders should watch for a move to the 187 Fibonacci level, while a break down lower could see a move to the 50-day moving average at 140.69. Technical indicators appear somewhat unreliable due to the fundamentally driven move, but the MACD recently experienced a bullish crossover and the RSI moved into overbought levels with a reading of 64.15.
The Dow Jones Industrial Average SPDR (ARCA:DIA) ETF followed the SPY higher. Currently, the index is consolidating above a key trendline, below prior high resistance levels at around 135. If the ETF breaks out higher, traders should watch for a test of this key 135 level, while a break down lower could see a move to the 50-day moving average at 129.95. As with many of the other indexes, the technical indicators are in mild disarray - due to the fundamental move - with the MACD showing a bullish crossover and the RSI remaining at overbought levels of around 62.25.
SEE: How Market Psychology Drives Technical Indicators
The PowerShares QQQ (Nasdaq:QQQ) ETF moved higher this week, following the other major indexes after the "fiscal cliff" resolution. Currently, the index is consolidating above a key trendline and below prior highs dating back to September 2012. If the ETF breaks out higher, traders should watch for a test of these prior highs at around 70, while a break down lower could see a move back down to the 200-day moving average at 65.10. Technical indicators suggest indecision with the MACD showing a very short-term bullish crossover and the RSI showing a relatively neutral reading of 59.64.
The iShares Russell 2000 Index (ARCA:IWM) ETF broke out to new highs this week. Currently, the index trades above prior highs at around 85.25, performing better than the other major indexes. If the ETF continues to break out higher, traders could see a move to Fibonacci levels around 92, while a break down lower could see a move to the 50-day moving average at around 81.32. Technical indicators are providing mixed signals, however, with the MACD in the midst of a strong bullish trend and the RSI trending at very overbought levels of 73.40.
SEE: Spotting Trend Reversals With MACD
The Bottom Line
The major U.S. indexes gapped sharply higher this week after the resolution of the U.S. fiscal cliff and amid positive economic signs. Traders should watch for these gaps to potentially close before a significant move higher, while being mindful of the many fundamental economic reports due out next week that could influence prices. U.S. jobless claims are due out on January 10 and international trade data is due out on January 11.
Charts Courtesy of stockcharts.com.
At the time of writing, Justin Kuepper did not own any shares in any company mentioned in this article.