The major U.S. indexes moved higher last week thanks to favorable economic data and a GOP tax bill that is ready for a vote. On Wednesday, the Federal Reserve hiked interest rates to a range of 125 to 150 basis points in a widely anticipated decision. Fourth quarter retail sales also rose a better-than-expected 0.8% thanks to very strong holiday spending, but industrial production came in lower than expected at 0.2% last month. The GOP tax bill will face a vote next week after lawmakers finalized the language over the past week.
International markets were lower over the past week. Japan's Nikkei 225 fell 1.11%; Germany's DAX 30 fell 0.38%; and Britain's FTSE 100 rose 1.22%. In Europe, British Prime Minister Theresa May announced the completion of the first round of Brexit talks, with trade and security talks beginning in March of next year. In Asia, analysts have warned that China's economy could face headwinds from overtightening and an end to cheap money and debt. (See also: China's Economic Indicators, Impact on Markets.)
The SPDR S&P 500 ETF (ARCA: SPY) rose 0.35% over the past week, making it the worst performing major index. After nearly reaching its pivot point support at $260.90, the index rallied to near its R1 resistance at $276.46 last week. Traders should watch for a breakout from upper trendline resistance at around $268.00 to R2 resistance at $271.26. Looking at technical indicators, the relative strength index (RSI) moved further into overbought territory at 74.42, while the moving average convergence divergence (MACD) remains in a bullish uptrend dating back to late November.
The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) rose 1.02% over the past week. After rallying from the middle of its price channel, the index moved to R1 resistance at $246.29 last week. Traders should watch for a breakout from these levels to R2 and upper trendline resistance at $250.30 or a move lower to retest trendline support at around $241.00. Looking at technical indicators, the RSI remains lofty at 78.16, but the MACD remains in a bullish uptrend dating back to late November. (For more, see: Higher Highs for Stocks, Again!)
The PowerShares QQQ Trust (NASDAQ: QQQ) rose 1.85% over the past week, making it the best performing major index. After hitting trendline and S1 support, the index rallied to R1 resistance at $157.64 last week. Traders should watch for a breakout from these levels and upper trendline resistance to R2 resistance at $160.12 or a move lower to retest the pivot point at $154.20. Looking at technical indicators, the RSI is nearing overbought levels at 67.03, but the MACD could see a near-term bullish crossover.
The iShares Russell 2000 Index ETF (ARCA: IWM) rose 0.38% over the past week. After falling from highs made earlier this month, the index has been trading sideways along its pivot point at $150.90 for much of the past month. Traders should watch for a breakout from these levels toward upper trendline and R1 resistance at $157.30 or a breakdown to test support at around $49.00. Looking at technical indicators, the RSI appears neutral at 57.69, while the MACD has been trending modestly lower since the beginning of the month. (See also: ETF Bubble or No Bubble?)
The Bottom Line
The major indexes moved higher over the past week, led by technology stocks on the PowerShares QQQ Trust and lagged by the broad market S&P 500 Index. Next week, traders will be closely watching the GOP tax bill vote along with home sales data on Wednesday and Friday and GDP data on Thursday. Traders will also be keeping an eye on the ongoing investigations of President Trump's administration and evolving risks in North Korea. (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.