The major U.S. indexes moved sharply lower last week amid ongoing political risks, including President Trump's newly announced tariffs and decision to rebuild his cabinet, as well as Special Counsel Robert Mueller's subpoena of the Trump Organization. The 30-year Treasury bond rose nearly 1%, sending yields sharply lower, as investors sought out safe-haven assets to ride out the market turbulence.
International markets were mixed over the past week. Japan's Nikkei 225 rose 0.99%, Germany's DAX 30 rose 0.35%; and Britain's FTSE 100 fell 0.87%. In Europe, the regional economy appears to be very strong, but inflation remains sluggish, and the European Central Bank's (ECB) bond buying programs may persist past September after all. In Asia, China's economy posted stronger-than-expected gains due to export demand but continues to face debt-related risks.
The SPDR S&P 500 ETF (ARCA: SPY) fell 1.67% over the past week. After briefly surpassing its prior reaction highs, the index moved lower to test the 50-day moving average at around $273.47. Traders should watch for a breakdown to lower trendline support at around $270.00 or a rebound higher to test upper trendline resistance at $280.00. Looking at technical indicators, the relative strength index (RSI) appears neutral with a reading of 53.13, but the moving average convergence divergence (MACD) has been slowly trending higher, suggesting a bullish bias over the coming week. (See also: Stock Strategies for a Highly Volatile Market.)
The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) fell 1.76% over the past week, making it the worst performing major index. After making reaction lows, the index moved to test upper trendline resistance before falling to the pivot point at around $248.08. Traders should watch for a breakout from upper trendline resistance at $252.00 or a breakdown from trendline support around $248.00. Looking at technical indicators, the RSI appears neutral with a reading of 48.97, while the MACD has trended sideways for the past several weeks.
The Invesco QQQ Trust (NASDAQ: QQQ) fell 1.24% over the past week. After briefly hitting R1 resistance at around $175.25, the index moved sharply lower during the week. Traders should watch for the index to test trendline support at around $168.00 or rebound higher to retest R1 and trendline resistance at around $175.25. Looking at technical indicators, the RSI appears a bit lofty at 58.13, but the MACD remains in a bullish uptrend that could suggest a rebound higher over the coming week. (For more, see: Why Money Is Flooding Into Tech Funds.)
The iShares Russell 2000 Index ETF (ARCA: IWM) fell 0.7% over the past week, making it the best performing major index. After rebounding sharply in early March, the index reached prior highs at around $160.00 and moved marginally lower. Traders should watch for a rebound from R1 support at around $157.54 to retest $160.00 resistance or a move lower to the 50-day moving average at around $154.68. Looking at technical indicators, the RSI appears a bit lofty at 58.80, but the MACD remains in a robust bullish uptrend.
The Bottom Line
The major indexes moved lower over the past week, but moderate RSI readings and moderate to bullish MACD readings point to a potentially bullish week ahead. This week, traders will be closely watching several key economic reports, including the FOMC meeting results on March 21, jobless claims on March 22 and new home sales data on March 23. The market will also be keeping an eye on the evolving geopolitical risks moving into the new week. (For additional reading, check out: 8 Stocks for Big Short-Term Gains.)
Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.