The major U.S. indexes moved lower over the shortened holiday week amid mounting foreign policy risks and President Trump’s comments that the dollar was getting ‘too strong.' Despite these headwinds, there are signs that first quarter earnings could exceed expectations with the fastest growth rates in years. FactSet’s Earnings Insight shows that 76% of S&P 500 companies that have reported Q1’17 financials have beat mean EPS estimates with a blended earnings growth rate of 9.2% — the highest growth rate since the fourth quarter of 2011.
International markets were mixed over the past week. Japan’s Nikkei 225 fell 1.79%; Germany’s DAX 30 fell 0.95%; and, Britain’s FTSE 100 fell 0.37%. In Europe, Trump’s comments on the dollar being ‘too strong’ sparked a sell-off as the euro could increase in value and hurt exports if the dollar drops. In Asia, Japanese stocks moved sharply lower amid rising tension between the United States and North Korea, where a conflict could significantly impact the region’s economies – including Japan’s massive economy.
The S&P 500 SPDR (ARCA: SPY) fell 1.13% over the past week. After hovering around its pivot point for the past month, the index experienced a breakdown from its 50-day moving average and trend line support toward S1 support at $231.81. Traders should watch for a breakout from S1 support to S2 support at $227.87. Looking at technical indicators, the RSI has become oversold at 37.40, while the MACD remains in a bearish downtrend that dates back to early March and recently took a turn lower after a brief resurgence.
The Dow Jones Industrial Average SPDR (ARCA: DIA) fell 0.97% over the past week, making it the best performing major index. After hovering above its 50-day moving average, the index experienced a breakdown from its 50-day moving average. Traders should watch for a move to S1 support at $203.04 or a rebound back above its trend line resistance at around $207.00. Looking at technical indicators, the RSI appears oversold at 35.77 while the MACD remains in a bearish downtrend since early March.
The PowerShares QQQ Trust (NASDAQ: QQQ) fell 1.18% over the past week. After breaking down from its pivot point, the index reached its lower trend line and S1 support at $130.27 where it could see a breakdown. Traders should watch for a breakdown toward lower trend line and S2 support at $128.17 or a rebound back to its pivot point at around $131.51. Looking at technical indicators, the RSI is relatively neutral at 43.29 while the MACD remains in a bearish downtrend since early March when it experienced a bearish crossover.
The iShares Russell 2000 Index ETF (ARCA: IWM) fell 1.33% over the past week, making it the worst performing major index. Since briefly hitting its 50-day moving average earlier this month, the index has fallen toward its S1 support at $133.10. Traders should watch for a breakdown from these levels toward S2 support at $128.72 or a rebound toward its 50-day moving average or upper trend line resistance at $137.00. Looking at technical indicators, the RSI appears slightly oversold at 41.15 while the MACD remains in a bearish downtrend.
The Bottom Line
The major U.S. indexes moved lower over the past week. While some RSI readings seem oversold, MACD readings remain bearish in nature. Next week, traders will be watching several economic indicators including housing starts on April 18, the Beige Book on April 19, jobless claims on April 20, and existing home sales on April 21. The market will also be closely watching developments in Syria and North Korea for any signs of rising risk.
Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.