SPY Trends and Influencers October 12, 2013
- Posted by Greg Harmon
- on October 12th, 2013
A weekly excerpt from the Macro Review analysis sent to subscribers on 10 markets and two timeframes.
Last week’s review of the macro market indicators suggested, as the 4th Quarter and earnings season began there was no additional clarity in the equity markets. It looked like Gold ($GLD) would continue lower while Crude Oil ($USO) rose in the short pullback. The US Dollar Index ($UUP) looked to continue lower while US Treasuries ($TLT) consolidated with a downward short term bias. The Shanghai Composite ($SSEC) was poised to move lower and Emerging Markets ($EEM) were biased to the upside now. Volatility ($VIX) looked to remain low but drift higher although still in an area that was beneficial for the equity index ETF’s $SPY, $IWM and $QQQ. Their charts showed that the QQQ and IWM remained strong and consolidating in bull flags or channels, while the pullback in the SPY might be over.
The week played out with Gold drifting higher before ripping lower to end the week while Crude Oil moved down to test the lows of last week. The US Dollar found support and started a bounce while Treasuries teased both sides of the trade ending little changed. The Shanghai Composite continued to stick like glue to the 200 day Simple Moving Average (SMA) while Emerging Markets moved higher. There was a spike in Volatility but the week ended lower than where it began. The Equity Index ETF’s found support just under key moving averages and reversed with the IWM and SPY ending the week higher. What does this mean for the coming week? Lets look at some charts.
The SPY started the week lower before recovering and finishing up for the week. The move below the 61.8% retracement of the Shark found support just under the 100 day SMA, a place that it curiously has been finding support lately. Look at the last two prior bottoms. The Hammer Wednesday was confirmed higher Thursday and then there was a great Follow Through Day (FTD) to end the week. The relative Strength Index (RSI) is back above the mid line and rising and it held in bullish territory during the pullback. The MACD is rising again as well and about to cross positive on the signal line. On the weekly picture the pullback found support right at the rising trend support line before bouncing. The RSI is in bullish territory and turning back up with a MACD that is diverging lower though. There is resistance higher at 170.98 and 173.60 with a Measured Move higher to 175.08. Support lower comes at 170 and 168.85-169.35 before 167.70. Continued Upward Price Action.
Moving into the October Options Expiration week, look for Gold and Crude Oil to continue to move lower. The US Dollar Index looks to continue higher in the down trend while US Treasuries consolidate but are biased lower. The Shanghai Composite and Emerging Markets are both biased to the upside in the short term. Volatility looks to remain low and falling again keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts also look higher with the IWM and QQQ near their highs but the SPY needing a little more to get there. 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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