Stocks Move Higher as Risks to the Rally Mount (SPY, DIA)

 

Stocks Move Higher as Risks to the Rally Mount (SPY, DIA)

By Justin Kuepper | Updated March 31, 2017 — 4:14 PM EDT

The major U.S. indexes moved higher over the past week, as of late Friday afternoon, driven by improving economic conditions and earnings growth. Final fourth-quarter gross domestic product (GDP) readings came in above expectations at 2.1% thanks to a 3.5% increase in consumer spending. Jobless claims also fell by 3,000 to 258,000 in the latest weeks, which is near their lowest level in decades. However, investors remain concerned about an increasingly uncertain political climate with the healthcare bill and intelligence investigations.

International markets were mixed over the past week. Japan’s Nikkei 225 fell 1.78%; Germany’s DAX 30 rose 2.06%; and, Britain’s FTSE 100 rose 0.07%. In Europe, Eurozone sentiment edged lower but remained strong in March as inflation expectations remain high. In Asia, Japan’s economy has witnessed higher factory output and a low jobless rate, but household spending remains soft, and consumer inflation was flat after removing the effect of rising energy costs – a development that could complicate the Bank of Japan’s policy actions.

The S&P 500 SPDR (ARCA: SPY) rose 0.94% over the past week, as of Friday afternoon. After rebounding from its 50-day moving average at $232.99, the index reached midway towards its R1 resistance at $239.21. Traders should watch for a move to R1 resistance levels or a renewed move downward to re-test its 50-day moving average or pivot point at $232.52. Looking at technical indicators, the RSI recovered but remains neutral at 55.72, while the MACD remains in a bearish downtrend that dates back to early March.

The Dow Jones Industrial Average SPDR (ARCA: DIA) rose 0.38% over the past week, as of Friday afternoon. After briefly touching its 50-day moving average at $204.65, the index rebounded toward its trend line resistance. Traders should watch for a move to R1 resistance at $211.33 or move lower to re-test its 50-day moving average and pivot point at around $204.21. Looking at technical indicators, the RSI appears neutral at 49.35, but the MACD remains in a bearish downtrend since early March.

The PowerShares QQQ Trust (NASDAQ: QQQ) rose 1.41% over the past week, as of Friday afternoon. After rising past its R1 resistance at $131.92, the index lost some steam towards the end of the week on its move to R2 resistance. Traders should watch for an extended rally to R2 resistance at $134.09 or a move lower to its lower trend line and 50-day moving average at $128.83. Looking at technical indicators, the RSI appears overbought at 66.53, but the MACD could experience a bullish crossover over the near-term.

The iShares Russell 2000 Index ETF (ARCA: IWM) rose 2.56% over the past week, as of Friday afternoon. After breaking through its pivot point and 50-day moving average at $136.53, the index is moving toward its upper trend line resistance. Traders should watch for a breakout from R1 resistance at $140.41 or a move lower to re-test its pivot point. Looking at technical indicators, the RSI appears slightly overbought at 57.24, but the MACD witnessed a bullish crossover that could signal a trend reversal.

The Bottom Line

The major U.S. indexes moved higher over the past week with mixed momentum readings from the MACD indicator. Next week, traders will be watching several key economic indicators including manufacturing data on April 3, FOMC minutes on April 5, jobless claims on April 6, and of course, employment data on April 7. Political developments out of the White House could also have an impact on the market as the risk of disruption of the status quo has been elevated.

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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Published at Fri, 31 Mar 2017 20:14:00 +0000

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