The midterm elections failed to deliver any major surprises, which helped stocks move higher last week. At the same time, the Federal Reserve kept interest rates steady in a widely anticipated decision. The central bank noted that economic activity and the job market remain strong. Investors expect the next interest rate hike during the December meeting.
Third quarter earnings have also remained strong over the past week. According to FactSet, 78% of S&P 500 companies reported positive earnings surprises while 61% reported positive sales surprises with nearly three-quarters of companies reporting. The downside is that 46 companies guided lower compared to 24 companies that guided higher.
Traders will be keeping a close eye on several key economic developments over the coming week, including consumer price index data on Nov. 14, retail sales on Nov. 15 and industrial production data on Nov. 16. The market will also be keeping a close eye on evolving geopolitical risk factors, particularly after the Attorney General’s sudden resignation.
Broad Market Moves Sharply Higher
The SPDR S&P 500 ETF (SPY) rose 1.94% last week. After breaking above the pivot point and 200-day moving average at $174.24, the index reached prior reaction highs and turned lower. Traders should watch for a potential double top that could signal a coming bearish downtrend or a breakout from the 50-day moving average at $282.23 to retest R1 resistance at $289.28. The relative strength index (RSI) appears neutral with a reading of 51.52, but the moving average convergence divergence (MACD) remains in a bullish uptrend following its crossover earlier this month.
Industrials Outperform the Market
The SPDR Dow Jones Industrial Average ETF (DIA) rose 2.85% last week, making it the best performing major index. After nearing S1 support and prior lows, the index rebounded sharply past its 50-day moving average at $258.46 before giving up a little ground. Traders should watch for a rebound from the 50-day moving average support to R1 resistance at $266.52 or a breakdown from support to the pivot point at $253.79. The RSI appears neutral at 56.92, but the MACD remains in a bullish uptrend following a crossover earlier this month.
Tech Stocks Gain Some Ground
The PowerShares QQQ Trust (QQQ) rose 1.11% last week. After breaking below the 200-day moving average late last month, the index rebounded to that level in recent sessions. Traders should watch for a breakout from these levels to test the 50-day moving average at $177.76 or R1 resistance at $184.87, or a move lower to retest lows near $160.00. Looking at technical indicators, the RSI appears neutral at 47.50, but the MACD remains in a bullish upswing following its crossover.
Small Caps Fail to See Gains
The iShares Russell 2000 (IWM) fell 0.02% last week, making it the worst performing major index. After breaking down from the 200-day moving average early last month, the index moved sharply lower before recovering to the pivot point near $154.68. Traders should watch for a breakout from these levels toward R1 resistance at $164.67, or a breakdown lower to retest prior lows at around $145.00. The RSI appears neutral at 46.32, but the MACD remains in a bullish uptrend after crossing over.
Charts courtesy of StockCharts.com. The author holds no position in the stock(s) mentioned except through passively managed index funds.