Last week, the Federal Reserve hiked interest rates, citing solid economic growth and a robust labor market. With weekly asset sales of more than $50 billion, the central bank’s portfolio of Treasury and mortgage-backed securities dipped below $4 trillion for the first time in more than four years. Investors anticipate one more rate rise before the end of the year.
Traders will be watching several significant economic data next week. The ISM Manufacturing Index will be published on Monday, the ADP Employment Report on Wednesday, and non-farm payrolls on Friday. Investors will also be watching for developments in the Sino-American trade war, which has recently gained traction.
Overseas, Italian politicians violated European Union austerity restrictions in their current budget. The ailing nation revealed projections for a 2.4% budget deficit for the next three years. Following the news, rating agencies are anticipated to lower Italian bonds, potentially destabilizing the regional economy. (Also see: Investors Face Worst Returns in a Decade.)
S&P 500 Remains Near Record
Last week, the SPDR S&P 500 Trust ETF (SPY) plummeted 0.3% to the bottom of its rising wedge chart pattern. Traders should keep an eye out for a bounce from trendline support toward the trendline and R1 resistance at roughly $294.00, or a breakdown from trendline support to the pivot point and 50-day moving average around $285.50. Looking at technical indicators, the relative strength index (RSI) is just slightly overbought at 60.62, but the moving average convergence divergence (MACD) witnessed a bearish crossing, indicating more fall.
Industrials Give Up Ground
After a false breakthrough, the SPDR Dow Jones Industrial Average ETF (DIA) lost 0.85% last week and returned to its price channel. Traders should keep an eye out for a move down to trendline support around $262.50 or a move higher into R2 and upper trendline resistance at approximately $267.50. Looking at technical indicators, the RSI remains slightly overbought at 63.09, while the MACD might show a bearish crossing. (For additional information, see:Red Flags Fly Amid Bull Market’s Record Gains.)
Tech Stocks Reverse Decline
Last week, the Invesco QQQ Trust ETF (QQQ) gained more than 2%, making it the best performing major index. For the previous month, the index has been trading around upper trendline support after breaking out of its price channel. Traders should keep an eye out for a return to the price channel or a move down below the 50-day moving average at $181.63. Looking at technical indicators, the RSI looks to be a little high at 60.95, but the MACD might see a positive crossing in the near future.
Small Caps Break Lower
Last week, the iShares Russell 2000 Index ETF (IWM) dropped roughly 1%, making it the poorest performing major index. Traders should keep an eye out for a breach from the trendline and S1 support at approximately $166.75 to S2 support and the 200-day moving average at $159.70, or for a rebound upward to retest the upper trendline and R1 resistance around $175.64. When it comes to technical indicators, the RSI is neutral at 45.17, while the MACD is still in a long-term negative decline. (For more information, see: The Economy Is Sending Warning Signs to Investors.)
StockCharts.com provided the charts. Except via passively managed index funds, the author has no investment in the stock(s) mentioned.
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