The S&P 500 index moved higher last week thanks to a recovery in the tech and healthcare stocks and renewed trade talks with China. Despite rising interest rates, the financial sector continued to struggle during the week. Many economists are skeptical that long-term interest rates will rise, while higher mortgage rates could hurt lending volumes.
On the economic front, August retail sales came in well below consensus forecasts, but a strong July revision maintained a solid third quarter pace. Automobile sales fell sharply last month, but growth in e-commerce sales helped offset these losses to produce a modest 0.1% gain for the month. (For more, see: US Autos Hit Most by US, China Tariffs: AmCham.)
Next week, traders will be keeping a close eye on housing starts on Sept. 19 and existing home sales data on Sept. 20. The housing market has come under pressure in recent months thanks to rising interest rates and an affordability crisis in many parts of the country. Both new and existing home sales have fallen between May and July on an annualized basis.
The market will also be keeping a close eye on the impact of Hurricane Florence in the Carolinas, as well as any new talk of tariffs from President Trump. The proposed $200 billion in new tariffs could be the most significant salvo from the United States and draw a larger retaliation from China. (See also: Equities to Fall as Much as 20% If China Trade War Intensifies: David Tepper.)
S&P 500 Regains Ground
The SPDR S&P 500 ETF (SPY) rebounded from pivot point support near the middle of its price channel at $287.07 last week. Traders should watch for a breakout from prior highs to test upper trendline and R1 resistance at $294.98 or a move lower to retest reaction lows near its pivot point. Looking at technical indicators, the relative strength index (RSI) appears slightly overbought with a reading of 65.74, but the moving average convergence divergence (MACD) could see a near-term bullish crossover.
The SPDR Dow Jones Industrial Average ETF (DIA) broke out from its prior highs toward the top of its price channel. Traders should watch for a move to test trendline and R1 resistance at $264.63 or for some consolidation at around $260.00. The RSI appears overbought with a reading of 67.27, but the MACD could see a near-term bullish crossover that signals upside ahead. For more, see: 8 Stocks to Lead The Market: Morgan Stanley.)
Tech Stocks Recover
The Invesco QQQ Trust (QQQ) moved back above its former trendline support last week after hitting the 50-day moving average. Traders should watch for a rebound toward the upper end of the price channel near R1 resistance at $190.85 or some consolidation near the bottom trendline. The RSI appears neutral with a reading of 56.09, while the MACD could see a bullish crossover after trending lower this month.
Small Caps Tread Water
The iShares Russell 2000 ETF (IWM) continued to trend sideways along its trendline support and pivot point at $170.30. Traders should watch for a move higher off of these levels to retest highs or R1 resistance at $176.11, or a breakdown from these levels toward S1 support at $167.21 or S2 support at $161.41. The RSI appears neutral with a reading of 57.28, while the MACD remains in a bearish downtrend.