The stock market could see ongoing volatility next week as rising political risks compete against a strong domestic economy. Friday's jobs report was better than expected at 213,000 jobs added, but it doesn't factor in the impact of the trade war between the United States and China (and other trade partners), which could slow hiring in the manufacturing sector, disrupt the supply chain and raise prices for consumers. Reality could set in next week after last week's $34 billion tariff swap.
Next week, traders will be keeping a close eye on several economic indicators, including the consumer price index and jobless claims on July 12 and consumer sentiment data on July 13. Price inflation will continue to be a primary area of focus as the Federal Reserve looks to continue its hawkish policy. (See also: US Markets Hit Pause Button Ahead of Earnings.)
Broad Markets Rebound From Support
The SPDR S&P 500 ETF (SPY) rebounded from lower trendline and 50-day moving average support at around $271.00 last week. Traders will be watching for the index to continue toward upper trendline resistance at $282.50 or to move back down to trendline support at $270.00. Looking at technical indicators, the relative strength index (RSI) appears neutral at 57.46, but the moving average convergence divergence (MACD) could see a bullish crossover.
Industrials Remain Depressed
The SPDR Dow Jones Industrial Average ETF (DIA) continued to trend near lower trendline and 200-day moving average support levels at around $242.00. Traders will be watching for the index to break down from these key support levels to retest lows at around $230.00 or for a rebound above the 50-day moving average toward upper trendline resistance at $257.50. Looking at technical indicators, the RSI appears neutral at 47.75, but the MACD could see a bullish crossover in the near term. (For more, see: 6 Stocks to Outperform on Late Cycle Growth.)
Tech Stocks Post a Solid Rebound
The Invesco QQQ Trust (QQQ) rebounded from lower trendline support at around $171.00 toward the middle of its price channel last week. Traders will be watching for an ongoing rebound toward $182.00 on the upside or a move lower to retest its trendline support. Looking at technical indicators, the RSI appears neutral at 58.48, but the MACD could see a near-term bullish crossover that could spell more upside ahead.
Small Caps Approach Overbought Levels
The iShares Russell 2000 ETF (IWM) rebounded sharply from lower trendline support at around $161.00 to its prior highs of around $168.00. Traders should watch for a breakout to fresh highs toward upper trendline resistance at around $170.00 on the upside or a move lower toward the bottom of its price channel near the 50-day moving average on the downside. Looking at technical indicators, the RSI appears overbought at 65.29, but the MACD could see a near-term bullish crossover. (For additional reading, check out: 4 ETFs to Play the 2018 Small-Cap Boom.)
Charts courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.