Energy stocks are poised for continued gains this week after the Organization of Petroleum Exporting Countries (OPEC) increased production by less than many analysts expected last Friday. After meeting with Russia, OPEC announced that it would eventually go back to 100% compliance with the previously agreed upon output cuts but gave no concrete figures.
At the same time, industrials are likely to remain under pressure as European Union tariffs go into effect and investors await retaliatory tariffs from China following the latest round of U.S. tariffs on high-tech Chinese goods. President Trump also hinted on Friday that he may impose new tariffs on vehicles produced in Europe, which could further escalate tensions. (See also: How Much Does the US Trade With the EU?)
Traders will be closely watching several key economic indicators over the coming week. New-home sales on Monday will provide insights into the health of the real estate market; consumer confidence on Tuesday and consumer sentiment on Friday will tell a story about consumer spending; and the market will closely watch GDP figures and jobless claims due out on Thursday.
Broad Market Will Tread Cautiously
The SPDR S&P 500 ETF (NYSE ARCA: SPY) broke down from trendline support and R1 support at $257.87 last week. While the relative strength index (RSI) appears neutral at 53.70, the moving average convergence divergence (MACD) experienced a bearish crossover. Traders should watch for a move lower to trendline and 50-day moving average support levels at around $270.25 given the bearish sentiment, or a move to retest upper trendline resistance if equities move higher.
Industrials at the Greatest Risk
The SPDR Dow Jones Industrial Average ETF (NYSE ARCA: DIA) broke down from trendline support and the 50-day moving average at $245.69 toward pivot point support at $242.74. The RSI appears neutral at 43.92, but the MACD experienced a bearish crossover. Traders should watch for a breakdown from pivot point support to the 200-day moving average at $240.53 given the bearish sentiment, or a retest of the 50-day moving average.
Tech Stocks Close to a Double Top
The Invesco QQQ Trust ETF (NASDAQ: QQQ) briefly touched new highs near R2 resistance at $178.43 before moving sharply lower. The RSI moved off of overbought levels to 60.21, but the MACD could see a near-term bearish crossover. Traders should watch for a breakdown from trendline support and R1 support at $174.07 toward a trendline at $171.00, or a rebound higher to retest trendline resistance at R2 resistance. (For more, see: Sell Tech Stocks Now Before Bubble Bursts: Paulsen.)
Small Caps Continue to Outperform
The iShares Russell 2000 ETF (NYSE ARCA: IWM) briefly hit new highs before moving lower to R1 support at $167.54. The RSI moved off of overbought levels to 62.87, but the MACD may be ready for a bearish crossover. Traders should watch for a breakdown from these levels to the 50-day moving average at $160.99, or a rebound higher to retest upper trendline resistance at around $171.00. (See also: 3 Small-Cap Stocks That Can Thrive Amid a Trade War.)
Charts courtesy of StockCharts.com. The author holds no position in the securities mentioned.