The major U.S. indexes moved lower this week amid rising trade tension. President Trump threatened to impose tariffs on another $100 billion worth of Chinese imports on Thursday, which sparked concerns of an escalating trade war between the world's largest economies. On Tuesday, the U.S. indicated that it would impose a 25% tariff on $50 billion worth of Chinese imports, and China responded with $50 billion worth of tariffs for U.S. goods in its market.
International markets were higher over the past week. Japan's Nikkei 225 rose 0.59%; Germany's DAX 30 rose 2.03%; and Britain's FTSE 100 rose 1.63%. In Europe, momentum slowed to its weakest levels in more than a year, judging by a nearly two-point drop in March's Purchasing Managers Index. In Asia, Japan's economy could lose some of its momentum if consumer spending continues to slow amid growing trade friction.
The SPDR S&P 500 ETF (ARCA: SPY) fell 1.09% over the past week. After briefly testing prior lows made in early February, the index rebounded to its pivot point at $266.67 and has trended sideways over the past two weeks. Traders should watch for a breakout from the pivot point to the 50-day moving average at $269.83 or a breakdown from trendline support to S1 support at around $254.22. Looking at technical indicators, the relative strength index (RSI) appears neutral at 41.96, but the moving average convergence divergence (MACD) remains in a bearish downtrend that could signal more downside ahead. (See also: Where to Invest for a Trade War: Goldman's View.)
The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) fell 0.5% over the past week, making it the best performing major index. After briefly breaking out from the pivot point at $243.50 earlier this week, the index moved lower to end the week just above trendline support at around $233.50. Traders should watch for a breakdown from these levels to S2 support at around $224.10 or a move higher to test upper trendline resistance at around $247.99. Looking at technical indicators, the RSI appears neutral at 43.94, but the MACD could see a bullish crossover.
The Invesco QQQ Trust (NASDAQ: QQQ) fell 1.48% over the past week, making it the worst performing major index. After briefly retesting its prior lows from early February, the index rebounded toward its pivot point at $163.70 before turning lower once again. Traders should watch for a breakdown from trendline support at around $154.00 to S1 and 200-day moving average support at around $152.62 or for a rebound to retest the pivot point and 50-day moving average near $164.68. Looking at technical indicators, the RSI appears neutral at 40.41, but the MACD remains in a prolonged downtrend. (For more, see: Chip Stocks That Will Thrive on the AI Boom.)
The iShares Russell 2000 Index ETF (ARCA: IWM) fell 0.77% over the past week. After nearing its prior lows from early March, the index rebounded to its pivot point and 50-day moving average at $153.13 before moving lower. Traders should watch for a breakout from these levels toward R1 resistance at $158.49 or for a breakdown from lower trendline support to S2 support at $141.37. Looking at technical indicators, the RSI appears neutral at 44.67, but the MACD remains in a bearish downtrend that could suggest more downside ahead.
The Bottom Line
The major indexes moved lower in a choppy week of trading, but technical indicators remain neutral to bearish looking out. Next week, traders will be closely watching several key economic indicators including the FOMC minutes and consumer price index on April 11, jobless claims on April 12, and consumer sentiment data on April 13. Of course, the market will also be closely watching for potential developments in U.S.-China relations following the turbulent week. (For additional reading, check out: Stocks to Move Higher By End of 2018: Analyst.)
Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.