SPY Trends and Influencers September 21, 2013
- Posted by Greg Harmon
- on September 21st, 2013
A weekly excerpt from the Marco Review analysis sent to subscribers on 10 markets and two timeframes.
Last week’s review of the macro market indicators suggested, as we headed into September Options Expiration the market was looking stronger again. It looked for Gold ($GLD) to continue lower, possibly resuming the downtrend while Crude Oil ($USO) consolidated in the uptrend. The US Dollar Index ($UUP) looked to continue to the lower end of the broad range while US Treasuries ($TLT) were biased lower but might consolidate. The Shanghai Composite ($SSEC) and Emerging Markets ($EEM) both might continue to consolidate in their uptrends with an upward bias. Volatility ($VIX) looked to remain low keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ. Their charts looked as if they may consolidate first with the QQQ looking the strongest of the three.
The week played out with Gold starting lower before rebounding after the Fed meeting Wednesday higher while Crude Oil continued to consolidate in a slow drift lower. The US Dollar broke lower and accelerated after the meeting while Treasuries moved slightly higher. The Shanghai Composite turned lower, but was closed Thursday and Friday while Emerging Markets jumped but then gave up some of their gains to end the week. Volatility made new lows and remained subdued. The Equity Index ETF’s made new highs with the SPY and IWM making new all time highs and the QQQ multi-year highs before all gave back some ground late in the week. What does this mean for the coming week? Lets look at some charts.
The SPY gapped up to start the week and then took flight on the lack of policy change from the Fed only to erase the latter move at week’s end. Technically the new all time high, so a higher high, confirms the bullish trend. It has worked off a technically overbought condition with the RSI falling back under 70 but that looks like it will continue lower. The MACD on the daily chart is leveling on the signal line and pulling back on the histogram, both supporting more pullback. The Harmonic Shark pattern (pink triangles) triggered a reversal with a Terminal Price Bar Friday looking for a target of a retracement of 38.2% of the pattern, or to 169.57 first. The second target on a failure to hold there would be 167.08, a 61.8% retracement. That would fill the two open windows or gaps lower. On the weekly timeframe the week printed a Shooting Star, that if confirmed lower next week signals a reversal. But the pattern of higher highs and higher lows continues, for the uptrend. The new all time high confirms the RSI Positive Reversal discussed last week with a target of 178.27. The RSI on this timeframe is bullish and rising with a MACD that is turning higher, and if crosses will also support more upside price action. Divergence between the timeframes. There is support lower at 170 followed by 168.65-169.35 and then 167.70. Resistance is now at 170.97 and 173.60. Pullback in the Uptrend.
Heading into the last full week of the Quarter the equity markets look ready to absorb their latest highs. Look for Gold to continue lower while Crude Oil continues to consolidate with a downward bias. The US Dollar Index is pushing lower while US Treasuries look to continue to consolidate in the downtrend with a short term bias higher. The Shanghai Composite and Emerging Markets are poised to continue to the downside in their uptrends and the Volatility Index looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts are suggesting they need to consolidate or pullback from the new highs first though. Use this information as you prepare for the coming week and trad’em well.
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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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