SPY Trends and Influencers February 2, 2013

Last week’s review of the macro market indicators suggested, moving into the last week of January that the markets were still strong but getting a little cautious. Gold ($GLD) and Crude Oil ($USO) were consolidating with Gold better lower while Crude Oil was better higher. The US Dollar Index ($UUP) showed no signs of changing its sideways movement while US Treasuries ($TLT) were biased lower. The Shanghai Composite ($SSEC) and Emerging Markets $EEM) were consolidating in their uptrends with the Shanghai Composite the best bet for a pullback in the near term. Volatility ($VIX) looked to remain at unusually low levels keeping the bias for the equity index ETF’s higher. The $SPY and $IWM seemed be ready to turn over the leadership to the $QQQ, as both were becoming overbought.

The week played out with Gold popping higher early in the week only to hit resistance while Crude Oil melted up. The US Dollar moved lower as Treasuries continued down. The Shanghai Composite broke consolidation higher while Emerging Markets rebounded from a test of support. Volatility bounced off of the lows but but fell back remaining subdued. The Equity Index ETF’s made new highs with the SPY and IWM leading the way but the QQQ still lagging in a range. 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.)

strong>SPY Daily, $SPY
spy d
SPY Weekly, $SPY
spy w

The SPY moved up to the 150 level and consolidated there until it broke higher Friday, closing with another new multi-year high. The move out of consolidation gives it a Measured Move higher to 155 and then there is only the previous high at 157.42 from 2007 above that. The correction appears to have happened through time this time. The Relative Strength Index (RSI) is bullish and hovering around the technically overbought level, but no where near extreme, with a Moving Average Convergence Divergence indicator (MACD) histogram moving back higher along with the signal line on the daily chart. These support more upside price action but also start to give caution signals, not yet sell signals. The weekly view shows SPY at the top of the rising channel but with support for more upside from a rising and bullish RSI and a MACD that is positive and growing. Support lower is now found at 150 and then 147.10. More Upside.

Heading into the first full week of February the markets have their bull on. Gold looks to have stayed off a fall and will consolidate while Crude Oil continues higher. The US Dollar Index is moving lower again and US Treasuries are joining it to the downside. The Shanghai Composite is racing higher again after some consolidation and Emerging Markets are biased to the upside but consolidating. Volatility remains near historic lows and showing no signs of rising elevated keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. The weakening US Dollar and Treasuries support higher equity prices as well. And the charts of these ETF’s agree, with the QQQ looking to finally join the party higher. Use this information as you prepare for the coming week and trad’em well.

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Dragonfly Capital Views Performance Through January 2013 Expiry

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