SPY Trends and Influencers June 16, 2012

• Posted by Greg Harmon
• on June 16th, 2012

Last week’s review of the macro market indicators saw heading into the options expiration week the tone of the market had lightened but not quite turned bullish. Gold ($GLD) was back to being an enigma consolidating in the short term within the intermediate downturn in the long term upward trend while Crude Oil ($USO) looked to head lower, perhaps consolidating in the very short term. Treasuries ($TLT) and the US Dollar Index ($UUP) looked to further pullback or consolidate their recent gains in their uptrends. The Shanghai Composite ($SSEC) was on the verge of a big move lower while Emerging Markets ($EEM) continued to consolidate in their downtrend, perhaps ready to reverse. The Volatility Index ($VIX) continued to be biased to the upside but not in a strong manner. These influencers created the environment for the Equity Index ETF’s $SPY, $IWM and $QQQ to continue their bounce higher. Their charts were 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 would likely drive Equities, so a strong reversal back higher by either or both would change the equity bias back to bearish for the week.

The week played out with Gold moving higher, but within last weeks range while Crude Oil consolidated towards the low end of its recent range. The US Dollar continued to digest gains while Treasuries seem to have bottomed. The Shanghai Composite drifted sideways while Emerging Markets are testing resistance. Volatility continued to hold it higher base over 20. The Equity Index ETF’s started the week all in a huff about going lower only to move sideways after that. 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 long red bearish Marubozu candle scaring the daylights out of many. But it was not confirmed lower and instead consolidated the rest of the week, finishing at the top of the range at resistance. The Relative Strength Index (RSI) on the daily chart is moving through the mid line and making a 6 week high as it trends higher. The Moving Average Convergence Divergence (MACD) indicator is positive and continues to trend higher. Both support the upside. Moving out to the weekly chart the Dragonfly Doji signals a reversal higher after the broadening wedge bottom, and keeps it over the 8 month trendline support. The RSI on this timeframe held in the low 40′s and moving back higher again with a MACD that is improving toward the zero line. Both support the upside on this timeframe. Resistance over 134.30 is found higher at 136 and 139.28. There would also be a small Inverse Head and Shoulders with price objective of at least 141.66, above the May 1 high. A move over 136 would cancel the downtrend. Support lower comes at 131.46 and 129.60 followed by 128. Consolidation with Bias Toward Upside Breakout within Downtrend.

Heading into the Summer Solstice there are a lot of markets at critical points. Gold seems poised to move higher in the intermediate downtrend testing breakout levels while Crude Oil consolidates ahead of the next move, likely lower. The US Dollar Index looks to continue to pullback while US Treasuries are set t move higher. The Shanghai Composite and Emerging Markets are consolidating with Chinese Markets biased to the downside and Emerging Markets higher. Volatility looks to remain elevated but biased lower, making for an environment where the equity index ETF’s SPY, IWM and QQQ favor the downside. But their charts disagree, with the indicators pointing toward the consolidation breaking higher. It is unlikely that both US Equities and Treasuries both move higher, although not unprecedented. A strong move by one will likely push the other in the opposite direction. Keep a close watch. Use this information as you prepare for the coming week and trade’m well.

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