The major U.S. indexes moved sharply lower over the past week after President Trump announced plans to impose a 25% tariff on steel imports and a 10% tariff on aluminum imports. After the Commerce Department found that steel and aluminum imports posed a risk to national security, the Trump administration gained the authority to establish import tariffs and promised to rebuild the American steel and aluminum industries.
International markets were lower over the past week. Japan's Nikkei 225 fell 3.25%, Germany's DAX 30 fell 4.57%; and Britain's FTSE 100 fell 2.26%. In Europe, European Central Bank (ECB) President Mario Draghi indicated that slack in the Eurozone economy may be larger than initially estimated and noted the slow rise of inflation. In Asia, China voted to end term limits for President Xi Jinping in a move that has some investors and human rights activists concerned. (See also: Where Does the U.S. Import Steel From?)
The SPDR S&P 500 ETF (ARCA: SPY) fell 2.04% over the past week. After briefly reaching February's pivot point levels, the index moved sharply lower to March's pivot point levels at $269.21. Traders should watch for a breakout above these levels to retest the 50-day moving average at $273.08 or upper trendline resistance at around $278.00, or a move lower to retest reaction lows at around $258.00. Looking at technical indicators, the relative strength index (RSI) fell to slightly oversold levels of 46.00, while the moving average convergence divergence (MACD) could see a near-term bearish crossover.
The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) fell 2.99% over the past week, making it the worst performing major index. After briefly hitting its February pivot point at around $258.00, the index moved sharply lower. Traders should watch for a move down to reaction lows or S1 support at $243.83 or a rebound higher past its pivot point at $248.53 to the 50-day moving average at $252.07. Looking at technical indicators, the RSI appears modestly oversold at 42.62, while the MACD could see a near-term crossover. (For more, see: 6 Reasons for Another $6 Trillion Stock Market Correction.)
The PowerShares QQQ Trust (NASDAQ: QQQ) fell 1.30% over the past week. After briefly hitting its prior highs of around $170.00, the index moved sharply lower before rebounding from its pivot point and 50-day moving average at around $163.22. Traders should watch for a further rally to retest prior highs or a breakdown from the pivot point and 50-day moving average to reaction lows at around $155.00. Looking at technical indicators, the RSI appears neutral at 52.94, but the MACD could see a bearish crossover.
The iShares Russell 2000 Index ETF (ARCA: IWM) fell 1.06% over the past week, making it the best performing major index. After nearly reaching February's pivot point, the index moved sharply lower to its March pivot point at $150.00 before rebounding. Traders should watch for a rally past the 50-day moving average at $153.91 to R1 resistance at $157.54 or a move lower to retest reaction lows and the 200-day moving average at $145.60. Looking at technical indicators, the RSI appears neutral at 49.62, but the MACD could turn bearish.
The Bottom Line
The major indexes moved lower over the past week, with neutral RSI readings and bearish MACD readings predicting further downside. Next week, traders will be watching several economic indicators, including employment data due out on March 9. The market will also be closely watching how China and other trade partners react to President Trump's new tariffs for steel and aluminum imports. (For additional reading, check out: Tariff Talk May Signal NAFTA Exit: Goldman Sachs.)
Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.