SPY Trends and Influencers: Monthly Edition December into January 2013
- Posted by Greg Harmon
- on January 2nd, 2013
Last month in this space my Monthly Macro Review/Preview had the monthly outlook suggesting continued consolidation in their ranges for the metals Gold ($GLD) and Copper ($JJC), along with Crude Oil ($USO). Natural Gas ($UNG) retained the bullish bias but with topping signs. The US Dollar Index ($UUP) and US Treasuries ($TLT) both looked to continue a pause in their long term uptrends, with the Dollar biased lower. Foreign markets were mixed with the Shanghai Composite ($SSEC) looking horrible and the German DAX ($DAX) very good, but Emerging Markets ($EEM) in consolidation. Volatility ($VIX) could go either way but looked to remain above the lower range experienced in the last six months with the VIX in a narrow range between 15 and the low 20′s. With low volatility, the Equity Index ETF’s $SPY, $IWM and $QQQ were set up to continue higher in the coming months, but the current consolidation might continue for a little first. A major move by the Dollar or Treasuries lower or the Shanghai Composite higher could boost US Equities, whereas renewed strength in the Dollar or Treasuries could create a pullback. How does an additional month impact the longer term picture? Let’s look at some charts.
The SPY closed out the year with back to back Doji candles maintaining at the highs and the 88.6% retracement if the major move lower. Dividend adjusted it is at all time highs. The Relative Strength Index (RSI) is in bullish territory and the Moving Average Convergence Divergence indicator (MACD) is positive, both supporting further upside. Price is also running above the Simple Moving Averages (SMA). The picture is bullish but those Doji bring caution. The Median Line of the bullish Pitchfork is in control pushing it higher but also attracting it for a possible short term pullback. Resistance higher comes at 147.21 and 157.52. The 88.6% retracement keeps open the possibility of a Deep Crab on a significant pullback to at least 116 on C which could yield completion of the ABCD over 213. But that is getting ahead of ourselves. There is support lower at 141.1 and 137.75 followed by 127.14. Below that makes a lower low and ends the intermediate term uptrend. Consolidation in an Uptrend.
The monthly outlook suggests the metals Gold and Copper will continue to consolidate along with Crude Oil, while Natural Gas pulls back from its recent highs. US Treasuries look to continue their consolidation in the uptrend while the shorter term trend lower for the US Dollar Index will also continue. The Shanghai Composite, German DAX and Emerging Markets all look to continue to move higher. Volatility seems happy to continue in the lower range between 15 and 22.25 with no major changes in sight, giving a tailwind to the equity markets. The Equity Index ETF’s SPY, IWM and QQQ are set up to continue higher in the coming months, with IWM the strongest followed by the QQQ and then the SPY bringing up the rear. 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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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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