Strong Earnings and Tax Cuts Send Stocks Higher (SPY, DIA)

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The major stock market indexes moved significantly higher over the past week, as of mid-day trading on Friday afternoon. President Trump’s promises to implement broad tax cuts and implement other pro-business policies helped boost equities to new all-time highs, while strong corporate earnings helped support valuations to some extent. The financial sector was the single largest beneficiary from these regulatory cutbacks, but the energy sector also received a boost from rising crude oil prices that helped boost earnings.
International markets followed the U.S. markets higher over the past week. Japan’s Nikkei 225 rose 2.43%; Germany’s DAX 30 rose 0.13%; and, Britain’s FTSE 100 rose 0.93%. In Europe, the regional economy continued to keep pace or outperform the United States economy, while valuations are much more reasonable by many measures. In Asia, the Bank of Japan forecast stronger than expected growth over the coming quarters due to the rebounding global economy, but opted to keep its policy on hold for the time being.
The S&P 500 SPDR (ARCA: SPY) rose 1.05% over the past week. After a strong move higher, the index broke out from its upper trend line resistance at around $230.00. Traders should watch for an ongoing move to new highs or a retracement below trend line support to lower trend line support at $228.00. Looking at technical indicators, the RSI appears overbought at 70.76, but the MACD could be in the midst of a bullish crossover.


The Dow Jones Industrial Average SPDR (ARCA: DIA) rose 1.30% over the past week. After re-testing its upper trend line resistance, the index broke through to new highs. Traders should watch for an ongoing move higher or a retracement to trend line support at around $198.00 or the 50-day moving average at $197.97. Looking at technical indicators, the RSI appears overbought at 71.19, but the MACD could see a bullish crossover.


The PowerShares QQQ Trust (NASDAQ: QQQ) rose 1.47% over the past week. After moving consistently higher over the past several sessions, the index moved towards its upper trend line resistance at around $128.00. Traders should watch for a breakout from these levels or a retracement to its lower trend line support at around $126.50. Looking at technical indicators, the RSI appears overbought at 77.06, while the MACD could see a bearish crossover.


The iShares Russell 2000 Index ETF (ARCA: IWM) rose 1.05% over the past week. After rebounding past its 50-day moving average at $135.39, the index broke out from its upper trend line resistance at $138.00. Traders should watch for an ongoing breakout to new highs or a move lower to its lower trend line resistance at about $133.50. Looking at technical indicators, the RSI appears relatively neutral at 59.82, but the MACD could see a bullish crossover.

The Bottom Line

The major market indices moved higher over the past week, as of mid-day trading on Friday afternoon, although many indices trade with lofty RSI readings. Next week, traders will be watching several key economic indicators, including retail sales data on February 15, housing data on February 16, and leading indicators on February 17.
Charts courtesy of StockCharts.com.
As of the time of writing, the author had no holdings in the securities mentioned.


Source: www.investopedia.com

 








































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