The major U.S. indexes moved higher last week, with tech stocks outperforming small-cap stocks. While nonfarm payrolls came in lower than expected, signs of wage inflation helped boost investors' appetite and push the Dow Jones Industrial Average above 25,000 for the first time in history. Price-to-earnings multiples remain a key concern for some investors, with the S&P 500's average hitting 26.36 – the highest levels since the dotcom and mortgage bubbles.

International markets were also higher over the past week. Japan's Nikkei 225 rose 2.76%; Germany's DAX 30 rose 3.15%; and Britain's FTSE 100 rose 0.28%. In Europe, the Eurozone's manufacturing PMI rose to its highest levels on record, but inflation came in lower than many had hoped. In Asia, investors have expressed growing concern over China, Russia and Korea's heavy dollar-denominated debt repayment schedule in the new year. (See also: International Stocks a Way to Play Inflation in 2018.)

The SPDR S&P 500 ETF (ARCA: SPY) rose 2.46% over the past week. After breaking out from R1 resistance at $270.50, the index reached upper trendline and R2 resistance at around $274.13. Traders should watch for a breakout from these levels to fresh all-time highs or a breakdown from R1 support to the pivot point at $264.96. Looking at technical indicators, the relative strength index (RSI) moved into overbought territory at 79.66, while the moving average convergence divergence (MACD) experienced a bullish crossover that could suggest further upside ahead.

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

The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) rose 2.16% over the past week. After breaking out from R1 resistance at $251.04, the index moved toward upper trendline resistance. Traders should watch for a breakout from R2 resistance at $254.70 or a breakdown from R1 support to lower trendline and pivot point support at $244.95. Looking at technical indicators, the RSI appears lofty at 82.47, but the MACD could see a near-term bullish crossover that suggests upside over the near term. (For more, see: Why Bank Of America Sees 2018 Stock Returns Near 20%.)

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

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 3.95% over the past week, making it the best performing major index. After breaking out from R1 resistance at $159.11, the index moved above trendline resistance at $161.00. Traders should watch for a move to R2 resistance at $162.45 or a breakdown below trendline support to retest R1 support at $159.11. Looking at technical indicators, the RSI appears overbought with a reading of 73.57, but the MACD experienced a bullish crossover.

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

The iShares Russell 2000 Index ETF (ARCA: IWM) rose 1.53% over the past week, making it the worst performing major index. After testing prior highs, the index stands just below R1 resistance at around $155.46. Traders should watch for a breakout from R1 resistance to upper trendline resistance at around $157.00 or a breakdown from lower trendline support to the pivot point at $151.82. Looking at technical indicators, the RSI appears a bit lofty at 63.67, while the MACD has trended sideways.

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

The Bottom Line

The major indexes moved higher last week, with a bullish employment report sending the indexes to fresh highs. This week, traders will be closely watching several key economic indicators, including retail sales and consumer price index (CPI) data on Jan. 12. (For additional reading, check out: Monitor the Markets, the Fed and Politics in 2018.)

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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