SPY Trends and Influencers: Monthly Edition April into May 2012
- Posted by Greg Harmon
- on May 1st, 2012
Last month in this space my Monthly Macro Review/Preview suggested that Gold would continue lower with a chance of consolidation in the long term uptrend while Copper was ready to move higher. In the Fuels, Crude Oil looked good to the upside while Natural Gas continued to look like a natural disaster. The US Dollar Index looked better to the upside but might continue to consolidate while Treasuries were now biased lower. In the foreign markets the Shanghai Composite looked to continue lower with Emerging Markets moving sideways and Germany heading higher, something for everyone. The Volatility Index was biased lower but at the current levels was not expected to go much lower quickly but also not expected to rise soon. These influencers set the stage for the US Equity Index ETF’s, SPY, IWM and QQQ to continue higher and their charts agreed. How does an additional month impact the longer term picture. Let’s look at some charts.
The SPY consolidated at the high made last month. This is also just underneath the full retracement of the major move lower from the financial crisis. It is also right at the Measured Move higher from the October 2011 low (142) so consolidation is not unexpected. The Relative Strength Index (RSI) is bullish and strong with a Moving Average Convergence Divergence (MACD) that is positive and increasing, both supporting further upside, and suggesting this may be a pause not a top. Holding over the Hagopian Trigger Line, a buy signal, also supports the case for more upside. A move over 143 strengthens the bullish run and likely leads to the Upper Median Line of the bullish (green) Pitchfork attracting it higher. The next target would be a 123.6% Fibonacci extension to 161.96. It will take a pullback below 132 to start the process for a change of character and a move under 111, making a lower low, to turn it bearish. Until then any move lower should be considered a pullback in the uptrend.
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The monthly outlook suggests a lot of consolidation going on. Gold and Copper fit this with a bias for a breakdown for Gold but higher for Copper. US Treasuries and the US Dollar Index also fit the picture with Treasuries biased to a break higher. Crude Oil is one of the few strong charts among the influencers with Natural Gas biased to break lower or consolidate. The Shanghai Composite looks to consolidate with a lower bias while the German DAX looks biased higher but may consolidate here, with Emerging Markets consolidating with an upward bias. Volatility is even consolidating after a 7 month run lower. Despite all this consolidation, the Equity Index ETF’s SPY, IWM and QQQ are set up to continue higher in the coming months as they sit at resistance levels consolidating. Use this information to understand the long term trends in Equities and their influencers as you prepare for the coming months.
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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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