SPY Trends and Influencers February 16, 2013

Last week’s review of the macro market indicators suggested, heading into February Options Expiration week that the bull market would continue to chug along and get stronger from some perspectives. Gold ($GLD) looked to continue in its tightening range awaiting a break out while Crude Oil ($USO) pulled back in the uptrend. The US Dollar Index ($UUP) was looking to test the upside of the broad range while US Treasuries ($TLT) were biased lower. The Shanghai Composite ($SSEC) remains biased to the upside in its consolidation, but closed for the Chinese New Year, while Emerging Markets ($EEM) were testing the limits of how long a bull flag can run before turning into a downtrend. Volatility ($VIX) looked to remain subdued keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ. Their charts agreed with new 5 year highs for the SPY and all time highs for the IWM but most interesting a breakout of the range higher for the QQQ. It is unusual, but not unprecedented, for the Dollar Index to continue higher as Equities rise so a caution was issued to keep an eye on that as risk for a reversal.

The week played out with the break out in Gold arriving and it moving lower while Crude Oil consolidated around a major support/resistance level. The US Dollar continued toward the top of a range while Treasuries remained under support but stable. The Shanghai Composite was closed for the Chinese New Year celebration while Emerging Markets moved to the top of the flag channel. Volatility continued at unusually low levels and in a narrow range. The Equity Index ETF’s used this backdrop to continue higher with the IWM leading followed by the SPY and then the QQQ. 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
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SPY Weekly, $SPY
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The SPY continued the move higher early in the week and then consolidated to end it. The Measured Move higher to 155 remains as the next target with 157.42 above that. The Relative Strength Index (RSI) is bullish and avoiding a move into the technically overbought condition with a Moving Average Convergence Divergence (MACD) signal line that is near previous highs and leveling and a histogram that is flat all on the daily chart. The weekly picture shows a continuation of the breakout above the rising wedge. Price continues to move along the upper Bollinger band as it expands and the RSI bullish and rising along with the MACD signal rising and histogram increasing support more of the same. Support lower is found at 150 and 147.10. Continued Upside.

Heading into the Presidents Day shortened week Gold looks to continue lower toward the bottom of the long term channel as Crude Oil consolidates in the move higher. The US Dollar Index continues towards a test of the top of a broad consolidation with US Treasuries consolidating but biased lower. The Shanghai Composite is biased to the upside and Emerging Markets are biased to the downside short term in their rising trend. Volatility continues to be a no factor creating an environment for the equity index ETF’s SPY, IWM and QQQ, to move higher. Their charts agree, all with a bias higher, with the IWM strongest followed by the SPY and then the QQQ. A hard reversal on Treasuries on major move higher from the US Dollar seem to be the only outside influencers that could derail the equity move higher. Use this information as you prepare for the coming week and trad’em well.

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Dragonfly Capital Views Performance Through February 2013 Expiry

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