SPY Trends and Influencers June 9, 2012

• Posted by Greg Harmon
• on June 9th, 2012

Last week’s review of the macro market indicators saw heading into June the broad market looked weak. Gold ($GLD) looked better to the upside in the short run within the downtrend while Crude Oil ($USO) looked to continue lower. The US Dollar Index ($UUP) and US Treasuries ($TLT) looked strong to the upside with a chance of consolidation. The Shanghai Composite ($SSEC) and Emerging Markets ($EEM) were set up to consolidate within a downward bias. Volatility ($VIX) looked to continue higher as well. These influencers created an environment where the index ETF’s $SPY, $IWM and $QQQ, were set up to move lower and the charts agreed. I cautioned though that consolidation by the US Dollar Index and Treasuries might forestall further declines in Equities. The QQQ looked the strongest of the Equity Indexes.

The week played out with Gold probing higher until it retraced half of the pop, while Crude oil held lower. The US Dollar and Treasuries pulled back, the risk outlined above that drove the week. The Shanghai Composite moved lower later in the week as Emerging Markets jumped on the Dollar and Treasury weakness. Volatility pulled back but held the higher range. The Equity Index ETF’s took their cue from from the Dollar and Treasuries as well moving back up to near term resistance, with the IWM and QQQ leaving potential Island Reversals. 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 started the week with a Hammer reversal candle on the 200 day Simple Moving Average (SMA) and moved higher from there ending the week with a bullish Piercing Candle rising off of the falling 20 day SMA. It has yet to breach last week’s high at 133.93 so the downtrend is still in charge. The daily chart shows a Relative Strength Index (RSI) that is rising and making a new high. There is a caution in the RSI though as a price reversal would create a Negative RSI Reversal, currently with a target of 126.74. This remains in force until the price breaks above 133.93. The positive Moving Average Convergence Divergence (MACD) indicator supports more upside. Moving out to the weekly chart the expanding candles bring thoughts of a reversal higher, with the price back over the trendline support and holding at the 50 week SMA. The RSI on this timeframe has held bullish thus far and is turning back higher with a MACD that is negative but beginning to improve. There is support lower at 130 and 127.75 followed by 125.60 and a turn to full on bearish. Resistance is found higher at 134 with a break higher getting more bullish with resistance at 136 followed by 137.40 and 139.62 before the recent top. Short Term Uptrend within a Downtrend.

Heading into the options expiration week the tone of the market has lightened but not quite turned bullish. Gold is back to being an enigma consolidating in the short term within the intermediate downturn in the long term upward trend while Crude Oil looks to head lower, perhaps consolidating in the very short term. Treasuries and the US Dollar Index look to further pullback or consolidate their recent gains in their uptrends. The Shanghai Composite is on the verge of a big move lower while Emerging Markets continue to consolidate in their downtrend, perhaps ready to reverse. The Volatility Index continues to be biased to the upside but not in a strong manner. These influencers create the environment for the Equity Index ETF’s SPY, IWM and QQQ to continue their bounce higher. Their charts are more cautious though with the SPY looking the best followed by the QQQ and finally the IWM. Once again the US Dollar Index and Treasuries will likely drive Equities, so a strong reversal back higher by either or both would change the equity bias back to bearish for the week. Use this information as you prepare for the coming week and trade’m well.

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