SPY Trends and Influencers December 31, 2011

• Posted by Greg Harmon
• on December 31st, 2011

Last week’s review of the macro market indicators looked heading into the last week of the year that Gold ($GLD) was consolidating but looking to move lower while Crude Oil ($USO) may also consolidate but is biased to move higher. The US Dollar Index ($UUP) looked to continue higher while US Treasuries ($TLT) consolidate their loses above support. The Shanghai Composite ($SSEC) looked to consolidate further within the downtrend while Emerging Markets ($EEM) ride a short term wave higher within their downtrend. Volatility ($VIX) was poised to continue lower. The influencers of the Equity Index ETF’s were mixed but biased to support Equities moving lower. This was in conflict with the short term view in the charts of $SPY, $IWM and $QQQ which looked higher within a broad consolidation range, perhaps signaling a topping. The US Dollar Index joining Treasuries lower would help the rally in equities continue. But a reversal higher in Treasuries, joining the Dollar Index, could turn that consolidation range into a move lower. The strongest of the Equity Indexes was the SPY followed by the IWM and the weakest the QQQ.

The week began with Gold moving lower and Crude Oil moving higher, with both reversing later in the week. The US Dollar Index did move higher but not until later in the week while US Treasuries marched up off a bottom. The Shanghai Composite consolidated around the 2200 level while Emerging Markets consolidated in a narrow range. Volatility found bottom and rose marginally. These combined to give the Equity Index ETF’s SPY, IWM and QQQ a boost Tuesday followed by a series on consolidating candles with inside real bodies for the rest of the week. What does this mean for the coming week? Lets look at some charts.

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

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY consolidated around the falling trendline resistance and just over the 200 day SMA for the week, with what could also be interpreted as a bull flag. The 20 and 50 day SMA are also nearby. But all are moving sideways. It made a slightly higher high after a higher low but has been unable to get the RSI over 60 into bullish territory on the daily timeframe. It may pullback in the very short term. The MACD which had moved positive is also slowly fading. On the weekly chart it is approaching an action zone at the intersection of the Fibonacci Arc and Fan lines. The RSI flat lined near 50 since October gives no guidance but the MACD has remained positive and supports a move higher. There is resistance at 126.80 followed by 128.60 and then 132.90. Support lower comes at 121.20 followed by 118.50. Below that the slight uptrend is in question. Look for more mainly sideways action with a slight upward bias to continue next week.

Moving into the New Year the theme for the week is consolidation or a movement with in the range with a few exceptions. Gold may move higher but in a downtrend while Crude Oil holds the broad range. The US Dollar Index and Treasuries look to continue their upside bias but in slow ranges. A violent move from either will likely continue to drive the Equity Markets. The Shanghai Composite looks to consolidate around the 2200 level while Emerging Markets tighten their range. Volatility looks to creep up in the downtrend. These all create an environment for Equities to move lower. The very short term aspects of the SPY, IWM and QQQ charts agree but suggest a continued sideways to slightly higher move after a few days. Use this information as you prepare for the coming week and trade’m well.

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