SPY Trends and Influencers July 7, 2012

• Posted by Greg Harmon
• on July 7th, 2012

Last week’s review of the macro market indicators saw heading into the back half of the year a holiday shortened week and a market with some upside momentum. Crude Oil ($USO) looked to continue the move higher while Gold ($GLD) might consolidate the gains within a down channel. The US Dollar Index ($UUP) looked to continue its pullback in the uptrend while Treasuries ($TLT) continued to consolidate with an upside bias. The Shanghai Composite ($SSEC) could take a breather in its downtrend while Emerging Markets ($EEM) consolidated in their downtrend, determining if they wanted to reverse it. Volatility ($VIX) looked in control and the combination created an environment where the Equity Index ETF’s were biased higher. A reversal by the US Dollar Index or a move higher by Treasuries would likely negate this. The charts of the Equity Indexes generally agreed and pointed higher with the $IWM the strongest followed by the $SPY and then the $QQQ.

The week played out with Gold consolidating early and Crude Oil continuing higher with both reversing Friday. The US Dollar, surprisingly, and Treasuries both consolidated, before moving higher Friday. The Shanghai Composite consolidated lower while Emerging Markets found a bottom and moved higher. Volatility remained stable and lower. The Equity Index ETF’s all popped to start the week before giving it back on Friday as well. 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 higher above the 100 day Simple Moving Average (SMA) with a series of tight range candles before moving back to the 100 day SMA Friday. The daily chart shows the Relative Strength Index (RSI) made a higher high before the current pullback with a Moving Average Convergence Divergence indicator (MACD) that is positive but fading. These support more pullback or consolidation. The weekly chart shows a continued bear flag verging on turning to an uptrend. The RSI is rising but not yet turned bullish with a MACD that is negative but trending higher towards a bullish cross to positive. An upward bias on this timeframe but barely with the SMA moving sideways. There is resistance higher at 137.90 and 141 with a move over the April 2 high turning very bullish. Support below the current island is found at 134.12 and 133 before 131.46. Under that look for 128 and 126.50 to come into play along with a Measured Move to 122.40. Short Term Consolidation or Pullback in an Uptrend.

As the holiday week ends and many get back to work look for Gold to continue in a broad range with a downside bias while Crude Oil looks higher with a possibility of consolidation. The US Dollar Index and US Treasuries are set to move higher with the possibility that Treasuries continue to be stuck in their range. The Shanghai Composite is biding time before falling and Emerging Markets are biased to the upside. Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts agree on the longer timeframe with pullbacks or consolidation a possibility in the short run. Continue to watch Treasuries and the Dollar Index for reversals tat will impact the Equity markets. Use this information as you prepare for the coming week and trade’m well.

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