Stock market indexes were flat this week, continuing the sideways movement that has been in place for the last five weeks. This week’s winners were NFLX and AXP. Netflix, Inc. (NFLX) jumped 25.6% this week on better-than-expected subscription numbers. And American Express Co.(AXP) also soared 12%. On the flip side, eBay Inc. (EBAY) finished the week down 8.8%.
International markets were higher this week: Japan’s Nikkei 225 rallied 1.95%, the Germany’s DAX 30 rose 1.23%, and Britain’s FTSE 100 rose 0.01%.
At home, the S&P 500 SPDR (SPY) rose 0.4% the past week and has been moving sideways since the sizable drop on Sept. 9. The price is still holding just above trendline support which extends back to the beginning of the year. The uptrend remains intact indicating the price could rally back above the $219.60 high in the coming weeks. A drop below the Oct. 13 swing low of $211.21 warns of more downside—there is little support until the $201.50 to $198.65 region. The index ETF is above the 200-day moving average, which helps confirm the primary uptrend. The RSI indicator is near 50, showing neither strong buying or selling pressure. The MACD is below zero and showing significant bearish divergence going back to late 2015. While divergence can last a long time and isn’t a reliable trade signal, is does show upside momentum has significantly faded.
The Dow Jones Industrial Average SPDR (DIA) was down 0.04% over the past week. The price is moving along trendline support that extends back to the start of the year. The uptrend remains intact indicating the price could rally back above the $186.88 high in the coming weeks. A drop below the Oct. 13 swing low of $179.43 warns of a further slide. There is little support until the $172.50 to $170.37 region. The index ETF is well above the 200-day moving average, helping to confirm the primary uptrend. The RSI is near 50, showing neither strong buying or selling pressure. The MACD is hovering below zero and showing significant bearish divergence going back to late 2015. This warns the uptrend has lost its steam but is not an immediate sell signal.
The PowerShares QQQ Trust (QQQ) rose by 0.86% over the past week. The trend is up, and there is little evidence to the contrary unless the price drops below the Sept. 12 swing low of $113.63. In that case, there is little support until the $103.50 to $101.75 region. The index ETF is well above the 200-day moving average, but the RSI near 50 indicates there is neither strong buying or selling pressure currently. The MACD is above 0, and short-term bearish divergence in September and October is not a major concern since that type of divergence is typical when the price consolidates.
The iShares Russell 2000 Index ETF (IWM) rose 0.53% over the past week and is coming very close to the Sept. 13 swing low of $119.88. If the price falls below it, there is little support until the $111 to $108.19 region. That said, $119 to $120 is a support area so that the price could bounce off of it in alignment with the longer-term uptrend. The index ETF remains well above the 200-day moving average, and the RSI just below 50 shows a relative stasis between the bulls and bears. The MACD is hovering near zero as the lack of recent momentum has given the moving averages time to converge.
The Bottom Line
Overall, the major indexes were relatively flat this week. Watch price action, mainly for a breakout from this sideways movement. Trends remain up, but in the short-term breakouts could occur in either direction after a sustained sideways period like this. Next week, traders will be closely watching numerous key economic indicators, including International Trade in Goods at 8:30 a.m., New Home Sales at 10:00 a.m. and the EIA Petroleum Status Report all on Oct. 26. On Oct. 27, Durable Goods Orders and Jobless Claims come out at 8:30 a.m. and GDP numbers come out at 8:30 a.m. on Oct. 28.
Disclosure: As of the time of writing, the author had no holdings in the securities mentioned.
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