SPY Trends and Influencers June 23, 2012

• Posted by Greg Harmon
• on June 23rd, 2012

Last week’s review of the macro market indicators saw heading into the Summer Solstice there were a lot of markets at critical points. Gold ($GLD) seemed poised to move higher in the intermediate downtrend testing breakout levels while Crude Oil ($USO) consolidated ahead of the next move, likely lower. The US Dollar Index ($UUP) looked to continue to pullback while US Treasuries ($TLT) were set to move higher. The Shanghai Composite ($SSEC) and Emerging Markets ($EEM) were consolidating with Chinese Markets biased to the downside and Emerging Markets higher. Volatility ($VIX) looked to remain elevated but biased lower, making for an environment where the equity index ETF’s $SPY, $IWM and $QQQ favored the downside. But their charts disagreed, with the indicators pointing toward the consolidation breaking higher. It was unlikely that both US Equities and Treasuries both move higher, although not unprecedented. A strong move by one would likely push the other in the opposite direction. Cautioned to keep a close watch.

The week played out with Gold failing at resistance and pulling back while Crude Oil did continue its fall. The US Dollar found support and reversed back higher while Treasuries continued to consolidate, holding over support. The Shanghai Composite broke its consolidation lower while Emerging Markets found resistance and is pulling back slightly. Volatility pulled back through support and found a bottom ending the week only a few points lower. The Equity Index ETF’s started their week with the charts in control, moving higher before a big set back Thursday erased those gains, and more so for the SPY. 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 continued its rise early in the week only to have a double doji confirmed with a long Marubozu candle lower Thursday and holding Friday. The Relative Strength Index (RSI) is trending higher but pulling back, holding the mid line, with the Moving Average Convergence Divergence (MACD) indicator positive but fading. These express caution going forward. There is also a long scale negative RSI divergence the daily chart which has a price target of 121.75. This would be negated by a move over May 1 high. The weekly chart shows a shooting star doji, just over the short term trend line. The long upper shadow cautions for a pullback if confirmed lower next week. The RSI on this timeframe is turning back lower after a bounce and the MACD is negative but improving. There is divergence on this timeframe. There is support lower at 133 and 131.46 followed by 129.60 and 128. Resistance is found at 134.12 and 136 followed by 141. Consolidation with Short Term Upside Bias.

Heading into the last week of the second Quarter, look for Gold and Crude Oil to continue lower. The US Dollar Index is poised to move higher with US Treasuries continuing to consolidate with a slight downside bias in the short term. The Shanghai Composite looks headed lower while Emerging Markets continue the bear flag in the broad consolidation. Volatility looks to remain low keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. The view on Crude Oil contradicts this as Oil and Equities have been correlated, and a move higher by the US Dollar Index or especially Treasuries would likely bring Equities lower. Despite this the charts for the SPY, IWM and QQQ all show a short term upside bias within consolidation on the weekly view. Use this information as you prepare for the coming week and trade’m well.

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