The major U.S. indexes moved sharply higher last week. The Beige Book painted a moderate economy with strong employment but weakness in auto sales and the housing market, but nonfarm payrolls came in sharply higher than expected. While these reports were mixed, the market responded favorably as slowing economic growth and a lack of wage inflation could reduce the likelihood of four interest rate hikes this year.
International markets were also higher over the past week. Japan's Nikkei 225 rose 1.36%; Germanys DAX 30 rose 3.63%; and Britain's FTSE 100 rose 2.19%. In Europe, the European Central Bank held interest rates steady but suggested that ramping up economic stimulus was off the table. In Asia, China's leaders have expressed concern over both the economy and pollution during an annual state of the nation report to lawmakers. (For more, see: 4 Early Warning Signs of the Next Financial Crisis.)
The SPDR S&P 500 ETF (ARCA: SPY) rose 3.64% over the past week. After recovering from February lows, the index broke out from trendline resistance to retest its reaction highs. Traders should watch for a breakout to R1 resistance at $285.50 or a retest of prior all-time highs. On the other hand, traders could see a breakdown that retests the 50-day moving average at $273.77 or lower trendline and pivot point support at $269.21. Looking at technical indicators, the relative strength index (RSI) appears neutral at 59.64, but the moving average convergence divergence (MACD) could see a near-term bullish crossover.
The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) rose 3.35% over the past week, making it the worst performing major index. After rebounding from trendline support, the index could soon retest trendline resistance at around $255.00. Traders should watch for a breakout from trendline resistance to R1 resistance at $263.90 or prior all-time highs, or a breakdown from these levels to retest trendline support at around $248.00. Looking at technical indicators, the RSI appears neutral at 54.93, but the MACD could see a bullish crossover.
The Invesco QQQ Trust (NASDAQ: QQQ) rose 4.32% over the past week, making it the best performing major index. After rebounding from its 50-day moving average, the index broke out from trendline resistance at around $170.00 last week. Traders should watch for a move higher toward R1 resistance at $175.25 or R2 resistance at $183.29, or a move lower to retest trendline support at $170.00 or $167.50. Looking at technical indicators, the RSI appears lofty at 65.24, while the MACD remains in a bullish uptrend. (See also: Consumer Stocks Bump Techs as Investors' Favorite Sector.)
The iShares Russell 2000 Index ETF (ARCA: IWM) rose 4.3% over the past week. After rebounding from pivot point support, the index moved past the 50-day moving average and R1 resistance toward prior all-time highs just above $160.00. Traders should watch for a move to retest prior all-time highs, or a move lower to the 50-day moving average at $155.22 or the pivot point at around $150.00. Looking at technical indicators, the RSI appears lofty at 63.89, but the MACD remains in a bullish uptrend.
The Bottom Line
The major indexes moved higher over the past week. While the RSI levels for the QQQ and IWM are moving closer to overbought territory, the major indexes have some room to move higher. Next week, traders will be closely watching several key economic events, including retail sales data on March 14, jobless claims on March 15 and industrial production on March 16. The market will also be keeping a close eye on evolving geopolitical concerns. (For additional reading, check out: 'Buy on the Dip' Is Alive and Well as Investors Bet on Rebound.)
Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.