The major U.S. indexes moved higher over the past week. While nonfarm payrolls unexpectedly fell by 33,000, which is presumably due to the hurricanes, the big surprise was a decline in the unemployment rate by two-tenths of a point and an increase in average hourly earnings by 0.5%. The news followed an unexpectedly bullish ISM Manufacturing Index reading of 60.8 and an equally impressive ISM Non-Manufacturing Index reading of 59.8.
International markets followed U.S. markets higher over the past week. Japan’s Nikkei 225 rose 1.69%; Germany’s DAX 30 rose 0.99%; and Britain’s FTSE 100 rose 2.03%. In Europe, the IHS Markit survey hit a four-month high in a sign that the Eurozone economy is picking up steam. In Asia, Japan’s economy is likely to match its second best stretch of uninterrupted growth since World War II, despite an ongoing lack of inflation. (See also: Why Is Deflation Bad for the Economy?)
The SPDR S&P 500 ETF (ARCA: SPY) rose 1.25% over the past week, making it the worst performing major index. Since the beginning of the month, the index has posted a string of gains that have led it past trendline and R1 resistance at $253.79. Traders should watch for an extended breakout to R2 resistance at $256.34, or if a false breakout occurs, a move back into its price channel below trendline support. Looking at technical indicators, the relative strength index (RSI) has reached significantly overbought levels at 77.61, but the moving average convergence divergence (MACD) remains in a bullish uptrend.
The SPDR Dow Jones Industrial Average ETF (ARCA: DIA) rose 1.67% over the past week, making it the best performing major index. After breaking out from R1 resistance at $226.28, the index moved closer to R2 and trendline resistance at $228.74. Traders should watch for a breakout from these upper resistance levels or a move lower back into its price channel. Looking at technical indicators, the RSI appears very overbought at 80.45, but the MACD remains in a bullish uptrend following a near crossover in late September.
The PowerShares QQQ Trust (NASDAQ: QQQ) rose 1.52% over the past week. After forming an ascending triangle over the past few months, the index broke out to fresh highs just above R1 resistance at $147.18. Traders should watch for a breakout to R2 resistance at $148.91 or, if there’s a false breakout, a move back below trendline support. Looking at technical indicators, the RSI appears lofty at 65.97, but the MACD experienced a bullish crossover. (See also: 5 Big Tech Stocks’ Largest Threat May Be Uncle Sam.)
The iShares Russell 2000 Index ETF (ARCA: IWM) rose 1.26% over the past week. After breaking out from trendline resistance last month, the index moved close to R1 resistance at $151.66 before moving sideways. Traders should watch for a resumed move higher to R2 resistance at $155.14 or a move lower to trendline support at $147.00. Looking at technical indicators, the RSI appears very overbought at 81.18, but the MACD remains in a bullish uptrend. (For more, see: Could Small-Cap Rally Be Coming to a Close?)
The Bottom Line
The major indexes moved higher over the past week, but many remain overbought from a technical standpoint. Next week, traders will be watching several key economic indicators, including the FOMC minutes on Oct. 11 and retail sales data on Oct. 13. (For additional reading, check out: How Rising Wages Will Fire Up U.S. Stocks.)
Note: Charts courtesy of StockCharts.com. As of the time of writing, the author had no holdings in the securities mentioned.