All of the major U.S. indexes moved higher into record territory over the past week, but the Dow Jones Industrial Average captured headlines by surpassing the 23,000 mark. While the manufacturing sector posted slower-than-expected growth, industrial production and capacity utilization both moved higher. Many investors remain concerned over the market's valuation, which reached a 25.68x price-to-earnings multiple on Friday. These are the highest levels since the 2008 economic crisis and well above the 15.68x average.  

International markets were mixed over the past week. Japan's Nikkei 225 rose 1.42%; Germany's DAX 30 moved marginally lower; and Britain's FTSE 100 fell 0.21%. In Europe, investors have expressed concern over the slow pace of talks between Britain and the European Union ahead of Brexit. In Asia, Japan's Nikkei 225 matched its longest winning streak ever as investors continue to buy into the country's robust momentum. (See also: A Smart Way to Access Japanese Stocks.)

The SPDR S&P 500 ETF (ARCA: SPY) rose 0.85% over the past week, but it remains entrenched in overbought territory. After breaking out from upper trendline resistance earlier this month, the index broke out from R2 resistance at $256.34. Traders should watch for some consolidation at these levels or a breakdown below trendline support at around $254.00. Looking at technical indicators, the relative strength index (RSI) continues to trade at significantly overbought levels of 81.22, and the moving average convergence divergence (MACD) could be at risk of a near-term bearish crossover after topping out.

Technical chart showing the performance of the SPDR S&P 500 ETF (SPY)

The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) rose 1.92% over the past week, making it the best performing major index. After rising above R2 resistance at $228.56 earlier this month, the index broke out from upper trendline resistance last week. Traders should watch for some consolidation at these levels before a move higher or a breakdown below trendline support at $230.00. Looking at technical indicators, the RSI remains extremely overbought at 89.24, but the MACD remains in a robust uptrend. (For more, see: How Dow 26,000 Could Come Sooner Than You Think.)

Technical chart showing the performance of the SPDR Dow Jones Industrial Average ETF (DIA)

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 0.25% over the past week, making it the worst performing major index. After rising to R2 resistance at $148.91 earlier this month, the index moved largely sideways last week. Traders should watch for a breakout from these levels to fresh highs or a move lower to R1 resistance at $147.18. Looking at technical indicators, the RSI appears lofty at 65.24, while the MACD could experience a near-term bearish crossover. (See also: Why Big Investors Are Doubling Down on Pricey Tech Stocks.)

Technical chart showing the performance of the PowerShares QQQ Trust (QQQ)

The iShares Russell 2000 Index ETF (ARCA: IWM) rose 0.41% over the past week. After breaking out from trendline resistance late last month, the index trended lower throughout October before rebounding from trendline support. Traders should watch for a move to R1 resistance at $151.66 or a breakdown from trendline support to the pivot point at $144.95. Looking at technical indicators, the RSI appear overbought at 70.40, and the MACD remains in a bearish downtrend dating back to mid-October.

Technical chart showing the performance of the iShares Russell 2000 Index ETF (IWM)

The Bottom Line

The major indexes moved further into record territory last week, but they appear top heavy on a technical level. Next week, traders will be closely watching several key economic events including new home sales on Wednesday as well as GDP and consumer sentiment data on Friday. Traders will also be closely watching any progress in passing tax reforms that could benefit equities, and in particular small caps in the Russell 2000. (For additional reading, check out: Trump's Tax Reform Plan.)

Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.

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