SPY Trends and Influencers August 21, 2011

• Posted by Greg Harmon
• on August 21st, 2011

Last week’s review of the macro market indicators looked like a reversal of the previous week. Gold ($GLD) looked heading lower while Crude Oil ($USO) had a short term bias higher in a downtrend. The US Dollar Index ($UUP) looked to continue sideways in the 20.88-21.90 range, while US Treasuries ($TLT) looked to continue lower in an uptrend. The Shanghai Composite ($SSEC) and Emerging Markets ($EEM) looked to be headed higher. Volatility ($VIX) was biased to the downside with a move under 34 key to continuing lower, and giving a bias to the upside for the Equity Indexes $SPY, $IWM and $QQQ, also within a downtrend. The big question looked to be whether this was a dead cat bounce or for real.

As the week began the macro trends took control. Gold moved higher while Crude oil started higher but fell off through the week. The US Dollar Index did continue sideways but to the lower end of the range while US Treasuries moved higher. The Shanghai Composite and Emerging Markets started higher but reversed ending the week lower. the Volatility Index started the the week heading lower as Equity Index ETF’s SPY, IWM and QQQ moved higher only for all to reverse with Equities closing near the lows of the week and Volatility spiking again. How does this impact the view for the week ahead? Let’s look at some charts.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

VIX Weekly, $VIX

The Volatility Index jumped back higher to end the week, after a move lower early, breaking the bull flag higher to near last week’s high. The target for the flag break is 56. The RSI on the daily chart is rising and the MACD is increasing again both suggesting more upside. On the weekly chart the bullish engulfing candle negated last week’s inverted hammer/shooting star. The RSI on this time frame is rising and becoming elevated while the MACD is increasing as well. The RSI has fallen hard the last 2 times it has reached this level, suggesting a move lower may come soon. look for continued elevated Volatility next week with any pullback finding support at the 34-35 area and a move above 50 leading to a greater rise.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY started the week higher before a violent move lower to end the week near 112 support and the recent lows. The RSI is pointing lower and the MACD is growing more negative after it blew a Real Housewive’s of New Jersey air kiss. The weekly chart printed a bearish engulfing candle just above the 200 week SMA at 111.16. The RSI and MACD on the weekly basis support more downside. Look for the carnage to continue next week with some support in the 111.15 area and then the range between 110 and 102.50. Any upside move looks to find resistance at 114.14 and then 115.83-116.

The entire rubber band of the market is getting a little stretched but expect it to continue next week. Gold looks to continue higher as Crude Oil continues to sell off. The US Dollar Index appears comfortable continuing sideways while US Treasuries move higher. The Shanghai Composite and Emerging Markets look ready for more downside. Volatility looks biased higher leading to the expectation that Equity Index ETF’s SPY, IWM and QQQ continue lower. Remember that a stretched rubber band can result in two outcomes: a snap back, or the rubber band breaks and the real carnage results. Stay nimble. Use this information as you prepare for the coming week and trade’m well.

Full Version with 20 detailed charts and analysis: Macro Week in Review/Preview August 20, 2011

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