The major stock market indexes moved lower over the past week in the final trading days of 2016. The Dow Jones rose about 14% and the S&P 500 moved about 10% higher in 2016, while crude oil prices posted their best gains since 2009 and U.S. government bonds moved lower for the second year in a row. Many U.S. economic indicators continue to improve, but lofty price-earnings ratios and growing political risks could put the rally in jeopardy moving into 2017.

International markets followed the U.S. markets lower over the past week. Japan’s Nikkei 225 fell 1.62%; Germany’s DAX 30 rose 0.51%; and, Britain’s FTSE 100 rose 1.07%. In Europe, the regional economy has proven resilient to numerous shocks throughout 2016, but many political risks remain moving into 2017. In Asia, China’s economy continues to post improvements, but excessive borrowing and soaring property prices remain key risk factors.

The S&P 500 SPDR (ARCA: SPY) fell 0.67% over the past week. After nearly revisiting prior highs, the index moved below trend line support to its R1 resistance at $224.02. Traders should watch for a rebound from these levels to R2 resistance at $228.95 or a move lower to the 50-day moving average at $218.50. Looking at technical indicators, the RSI has moderated to around 52.58, while the MACD experienced a bearish crossover that could signal downside ahead.

SPY Chart

The Dow Jones Industrial Average SPDR (ARCA: DIA) dropped 0.34% over the past week, making it the best-performing major index. After nearly reaching new highs, the index moved lower toward its R1 support at $195.96. Traders should watch for a rebound to R2 resistance at $200.94 or a move lower to its R1 support to 50-day moving average at $189.76. Looking at technical indicators, the RSI remains overbought at 64.88 while the MACD continues to trend lower.

DIA Chart

The PowerShares QQQ Trust (NASDAQ: QQQ) fell 0.94% over the past week, making it the worst-performing major index. After briefly touching its upper trend line resistance, the index moved toward its 50-day moving average at $117.72. Traders should watch for a rebound to its R1 resistance at $119.84 or a breakdown to its pivot point at $116.48. Looking at technical indicators, the RSI appear neutral at 47.36, but the MACD may be experiencing the start of a bearish crossover.

QQQ Chart

The iShares Russell 2000 Index ETF (ARCA: IWM) fell 0.78% over the past week, as it continues to trade within a narrow range. Traders should watch for a breakout to R1 resistance at $138.28 or a breakdown to the 50-day moving average at $128.75. Looking at technical indicators, the RSI appears neutral at 55.13, while the MACD continued its downtrend after experiencing a bearish crossover.

IWM Chart

The Bottom Line

The major market indexes moved lower over the past week with technical indicators suggesting more downside ahead. Next week, traders will be closely watching numerous key economic indicators, including ISM Manufacturing data on Jan. 3, FOMC Minutes on Jan. 4, jobless claims on Jan. 5, and employment data on Jan. 6.

Charts courtesy of StockCharts.com.

As of the time of writing, the author had no holdings in the securities mentioned.

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