Chart Advisor

 

By Anthony Jerdine| January 22, 2016

The U.S. markets moved lower over the past week, as of Thursday’s close, driven by falling crude oil prices and worries over China’s growth. While cratering oil prices have led to an increase in energy defaults, the higher U.S. dollar has put pressure on the manufacturing sector. The Philadelphia Fed’s Manufacturing Index registered a negative 3.5% reading this week, confirming that the sector is officially in recession – a move that could push the rest of the economy in the same direction.

International markets were mixed over the past week, as of Thursday’s U.S. close. Japan’s Nikkei 225 fell 4.84%; Germany’s DAX 30 rose 0.03%; and, Britain’s FTSE 100 fell 0.66%. In Europe, the ECB’s dovish commentary send equities higher and the euro lower on Thursday. In Asia, China reported relatively robust annualized GDP growth of 6.8% for its latest quarter, but experts question the accuracy of such readings, given the government’s tendency to “smooth” economic figures.

The S&P 500 SPDR (ARCA: SPY) fell 0.6% over the past week, as of Thursday’s close. After falling below its trend line and S2 support at 193.15, the index stabilized at around 185.00 before moving a bit higher. Traders should watch for a further rebound to retest its S2 support or a move lower to the 180.00 level. Looking at technical indicators, the RSI appears oversold at 32.01, while the MACD remains firmly in bearish territory given the steep downward correction.

SPY Chart

The Dow Jones Industrial Average SPDR (ARCA: DIA) fell 0.7% over the past week, as of Thursday’s close. After breaking down from its S2 support at 166.68, the index neared 155.00 before rebounding a little higher. Traders should watch for a move higher to retest its S2 support or a move lower to the psychologically important 150.00 level. Looking at technical indicators, the RSI appears very oversold, while the MACD remains firmly in bearish territory.

DIA Chart

The PowerShares QQQ Trust (NASDAQ: QQQ) fell 0.01% over the past week, as of Thursday’s close. After moving sharply below its S2 support at 105.75, the index rebounding slightly above the psychologically important 100.00 level. Traders should watch for a further rebound back to its S2 support or a move below the 100.00 level. Looking at technical indicators, the RSI appears oversold at 31.37, while the MACD remains in freefall.

QQQ Chart

The iShares Russell 2000 Index ETF (ARCA: IWM) fell 1.13% over the past week, as of Thursday’s close. After breaking below its S2 support and lower trend line, the index briefly reached 95.00 before modestly rebounding. Traders should watch for a move back up to S2 support at 104.26 or a move to new lows at the psychologically important 90.00 level. Looking at technical indicators, the RSI appears very oversold at 25.27, while the MACD remains in bearish territory.

IWM Chart

The Bottom Line
The major indexes moved lower over the past week, as of Thursday’s close, with RSI readings pointing to oversold conditions and MACD readings pointing to more downside. Next week, traders will be watching a number of key economic indicators, including new home sales and FOMC minutes on January 27, jobless claims on January 28, and GDP data on January 29.

Note: Charts courtesy of StockCharts.com.

Anthony Jerdine

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