SPY Trends and Influencers 10/15/2011
- Posted by Greg Harmon
- on October 15th, 2011
Last week’s review of the macro market indicators looked for Gold ($GLD) and Crude Oil ($USO) to continue in their downward trends with the possibility that Gold continues its flag. The US Dollar Index ($UUP) looked ready to continue higher while Treasuries ($TLT) could pullback further in their up trend. The Shanghai Composite ($SSEC) reopened after a week off and the bias continued to be lower along with Emerging Markets ($EEM). Volatility ($VIX) should remain elevated, and the Equity Index ETF’s $SPY, $IWM and $QQQ continue to be biased lower morphing from their bear flags into downward channels. The inverse relationship between the SPY and Treasuries had decoupled Friday. We watched this as a strong move lower by Bonds should trigger a rise in Equities and a reversal of the downtrend in Bonds pushing Equities lower. A strong Dollar move higher or a hard drop lower by the Shanghai Composite could also sink Equities.
Volatility falling throughout the week and breaking the flag was the big news. Gold took the option to continue the flag sideways while Crude Oil moved higher. The US Dollar moved lower all week while Treasuries continued their downward move. The Shanghai Composite rebounded up to resistance and Emerging Markets broke higher finishing with some Doji candles. The Equity Index ETF’s continued their march higher aided by the falling Volatility and falling Dollar. What does this mean for the coming week? Lets look at some charts.
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The SPY continued to run higher and broke out above the descending broadening wedge. The last three daily candles, a Shooting Star, Hanging Man and Evening Star are all potential reversal candles, if confirmed with a lower close. It ended the week at resistance near the top of the lower range. The RSI is rising and now over 60, turning bullish and the MACD is increasing on the daily timeframe, both supporting more upside. On the weekly chart it printed a bullish Marubozu candle ending at the falling 20 week SMA. The RSI on this timeframe is rising at the mid-line and the MACD is about to cross positive, supporting more upside.
Next week looks for Gold to continue in its consolidation with a slight bias to an upside break, while Crude Oil continues higher with resistance nearby. Both the US Dollar and US Treasuries look poised to continue their recent moves lower. The Shanghai Composite and Emerging Markets also look to continue their recent moves higher but with resistance near and within the downtrend. Volatility appears to be receding and combined with the falling US Dollar and US Treasuries provides a solid background for Equity Index ETF’s, SPY, IWM and QQQ to move higher. The QQQ is leading the charge higher and if it makes new highs and holds, expect the upside for the SPY and lagging IWM to continue. A reversal by the Dollar Index or Treasuries higher could derail the upside trend as could a sharp move lower by the Shanghai Composite. Use this information as you prepare for the coming week and trade’m well.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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