All major U.S. indices finished last week in positive territory, led by the Nasdaq 100. This is a positive near-term factor for the overall market because technology stocks typically lead the broader market both higher and lower. For 2014, all major indices are in positive territory except for the small-cap Russell 2000, which is down 2.5%.

#-ad_banner-#Despite the strong showing from the Nasdaq 100, the three strongest sectors last week were all defensive ones: utilities (+2.4%), consumer staples (+1.7%) and health care (+1.3%). This suggests investor apprehension that, should it continue, may lead into an overdue corrective decline later this summer.

Russell 2000, Google Still Key to Market Direction
In the May 19 Market Outlook, I pointed out that the Russell 2000 had just tested and held major support at 1,083, saying, “As long as the Russell remains above it this week, I would view this level as a potential springboard for a new leg higher in the overall market.”  

The index has since risen as expected, by about 6% into last week’s highs. The benchmark S&P 500 has risen by 3% to new all-time highs during that time.

The chart shows the Russell 2000 is now testing minor overhead resistance at its 50-day moving average, currently situated at 1,137. It must make a sustained move above this minor trend proxy to clear the way for more near-term strength.

In the April 28 Market Outlook, I featured Google (NASDAQ: GOOG) saying it was testing major support at its 200-day moving average while technically oversold, setting up the ideal condition for its larger bullish trend to resume. I said I would view a positive reaction to this support as being bullish for both the Nasdaq 100 and broader market. 

GOOG bottomed the day of that report just below $503 and, after retesting and holding that level on May 7 to form a bullish-double pattern, has since risen by 13% into last week’s highs. The Nasdaq 100 coincidentally rose by 252 points, or 7%, during that time.

The recent rally in GOOG has positioned it just below $572, which is the 61.8% retracement of its February through April decline. It would take a sustained rise above $572 to confirm that the February correction is over and that GOOG’s larger bullish trend has resumed. 

Over the past several weeks, a lot of positive things have occurred in the stock market. The market-leading Nasdaq Composite and Russell 2000 aggressively rebounded from critical underlying support levels and have since been outperforming the bellwether S&P 500.  

Meanwhile, a bullish chart pattern in the SPDR Dow Jones Industrial Average (NYSE: DIA), discussed in the May 12 Market Outlook, remains valid and continues to target a 6% rise to $177. 

Looking ahead to this week, a rise above 1,137 in the Russell 2000 and/or $572 in Google would clear the way for more near-term market strength.

This article originally appeared on ProfitableTrading.com:
This Stock Remains Key to the Future Direction of the Market