The major U.S. indexes moved sharply higher over the past week, as small caps outperformed industrials in the Dow Jones Industrial Average. On Thursday, consumer price index data showed a steady 0.2% increase in inflation, including a welcome 0.1% decrease in medical prices. Friday's consumer sentiment reading also came in at a strong 98.8, suggesting that consumers remain bullish on the future of the economy. Final first quarter earnings reports have also remained strong with more than three-quarters of companies reporting positive earnings surprises.
International markets were higher over the past week. Japan's Nikkei 225 rose 1.09%; Germany's DAX 30 rose 1.35%; and Britain's FTSE 100 rose 2.13%. In Europe, the European Central Bank left its monetary policy unchanged amid concerns of a slowdown, due in part to uncertainty in the United States. In Asia, Japan's economy shrank for the first time in two years during the first quarter, but many experts remain bullish. Investors in China also remain somewhat concerned over the potential future of U.S. trade policy.
The SPDR S&P 500 ETF (ARCA: SPY) rose 2.15% over the past week. After breaking out from the 50-day moving average at $267.16, the index moved beyond trendline resistance to test R1 resistance at $272.32. Traders should watch for a further breakout to R2 resistance at $280.12 or a breakdown from trendline support to retest the 50-day moving average. Looking at technical indicators, the relative strength index (RSI) appears a bit lofty at 62.52, but the moving average convergence divergence (MACD) moved above the zero line and remains in a bullish crossover. (See also: Stock Investors' Flight to Safety May Cost Big Profits.)
The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) rose 2.06% over the past week, making it the worst performing major index. After breaking out from trendline and 50-day moving average resistance at around $243.96, the index moved to test R1 resistance at $248.90. Traders should watch for a further breakout to R2 resistance at $256.26 or a rebound to retest lower trendline resistance and the 50-day moving average. Looking at technical indicators, the RSI appears a bit lofty at 60.81, but the MACD looks bullish.
The Invesco QQQ Trust (NASDAQ: QQQ) rose 2.31% over the past week. After rebounding from the pivot point at $160.61, the index soared past trendline and R1 resistance to nearly $170.00. Traders should watch for an extended breakout toward R2 resistance at $173.73 or a breakdown back below R1 resistance to the 50-day moving average at $164.09. Looking at technical indicators, the RSI appears a bit lofty at 63.49, but the MACD remains in a bullish uptrend after passing through the zero line. (For more, see: 3 Tech Stocks Nearing a Breakout.)
The iShares Russell 2000 Index ETF (ARCA: IWM) rose 2.32% over the past week, making it the best performing major index. After rebounding from lower trendline support, the index moved past R1 resistance at $158.74 to test upper trendline resistance. Traders should watch for an extended breakout to R2 resistance at $164.16 or a breakdown back below R1 resistance to the 50-day moving average at $154.76. Looking at technical indicators, the RSI appears lofty at 65.84, but the MACD experienced a bullish crossover.
The Bottom Line
The major indexes moved higher over the past week. While RSI readings were a bit lofty, the MACD indicators appeared to show some bullish momentum. Next week, traders will be keeping a close eye on several key events, including retail sales data on May 15, industrial production on May 16 and the index of leading indicators on May 17. The market will also be keeping a close eye on potential breakthroughs in trade agreements being renegotiated. (For additional reading, check out: Can ETFs Help You Benefit From a Trade War?)
Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.