SPY Trends and Influencers July 14, 2012

• Posted by Greg Harmon
• on July 14th, 2012

Last week’s review of the macro market indicators saw as the holiday week ended and many got back to work looked for Gold ($GLD) to continue in a broad range with a downside bias while Crude Oil ($USO) looked higher with a possibility of consolidation. The US Dollar Index ($UUP) and US Treasuries ($TLT) were set to move higher with the possibility that Treasuries continued to be stuck in their range. The Shanghai Composite ($SSEC) was biding time before falling and Emerging Markets ($EEM) were biased to the upside. Volatility ($VIX) looked to remain subdued keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ. Their charts agreed on the longer timeframe with pullbacks or consolidation a possibility in the short run. Continue to watch Treasuries and the Dollar Index for reversals that will impact the Equity markets.

The week played out with Gold and Crude Oil behaving as the charts suggested. The US Dollar and Treasuries both broke out higher before retreating a bit Friday. The Shanghai Composite continued the slow grind lower while Emerging Markets tested lower before bouncing. Volatility moved slightly higher before falling back to end the week. The Equity Index ETF’s opted for the short term pullback option falling through the week before a bounce on Friday to recover some of the losses. 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 confirmed the doji’s that closed last week lower with a bearish engulfing candle and ran lower before a doji Thursday was confirmed higher on Friday. Friday’s candle was strong with almost no upper shadow. The Relative Strength Index (RSI) on the daily chart held the mid line and is moving back higher, never having touched bearish territory, with a Moving Average Convergence Divergence indicator (MACD) that stalled at the zero line, not wanting to turn negative. The Simple Moving Averages (SMA) are all moving sideways so it will still take some time before an trend can be confirmed either way, but the price action Friday was positive. The weekly chart printed a Hanging Man with a RSI that is flattening after a run higher and a MACD that is looking like it will avert a cross to positive. There is resistance higher at 136 and 137.80 followed by 141. Support lower comes at 133 and 131.46 followed by 129.00 and 126.50. A move under 126.50 negates any upward bias confirming a bear flag breakdown. Upside with a Chance of Consolidation Short Term.

Heading into the new week there is a bit of a positive tone but with a diverging inter-market macro view. Gold and Crude Oil look to continue their trends lower but with consolidation or a short term rise. The US Dollar Index and Treasuries both look to continue higher. The Shanghai Composite looks to continue lower while Emerging Markets follow Equities drifting higher. The Volatility Index looks to remain subdued and may even move lower. This creates the mixed view with Treasuries and the Dollar support downside for Equities while Volatility allows for a further rise. The charts of the Equity Index ETF’s, SPY, IWM and QQQ, all look better to the upside in the short term within broad consolidation or bear flags. Use this information as you prepare for the coming week and trade’m well.

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