SPY Trends and Influencers March 2, 2013
- Posted by Greg Harmon
- on March 2nd, 2013
Last week’s review of the macro market indicators suggested, moving into the last week of February that the markets gave a wake up call, but then hit the snooze button. Gold ($GLD) was the exception testing long term support while Crude Oil ($USO) pulled back in the uptrend. The US Dollar Index ($UUP) looked to continue its move higher with US Treasuries ($TLT) consolidating in the short term downtrend. The Shanghai Composite ($SSEC) and Emerging Markets ($EEM) were biased to the downside as well. Volatility ($VIX) looked to remain low keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ. The charts showed potential for a short term pullback in the SPY and IWM but the longer term looked to the upside. This pullback could be triggered by a continued strong rise in the US Dollar through the nearby major resistance, Gold and Oil turning long term bearish, or Treasuries reversing higher. The QQQ however looked to be comfortable back in its channel within the long term consolidation. Its eventual breakout could be the key to the long term market direction.
The week played out with Gold starting higher only to fail while Crude Oil continued the downward move. The US Dollar broke higher out of the range while Treasuries rebounded to the upside. The Shanghai Composite found support and bounced while Emerging Markets settled over long term support. Volatility peeked higher again but sold off to end the week only slightly higher. The Equity Index ETF’s fell hard to start the week but recovered well, working back over 2/3 of their moves lower. What does this mean for the coming week? Lets look at some charts.
The SPY started the week lower, clipping the bottom Bollinger band, before bouncing higher. A very technical week, the Hammer Tuesday was confirmed higher Wednesday, but the Shooting Star Thursday negated with Friday’s higher close and engulfing real body. The 20 day Simple Moving Average (SMA), also the center line of the Bollinger bands, is playing a leading role as it moves sideways. The Relative Strength Index (RSI) on the daily chart bounced back higher after touching the mid line and the Moving Average Convergence Divergence (MACD) indicator has flattened on the signal line, after pulling back the previous week, while the histogram improves. A bit better view to the upside that this time last week. The weekly chart printed yet another Hanging Man Candle. This needs to be confirmed lower next week to be a reversal. But the rest of that picture looks good. The week moved slightly higher and on increased volume, remaining over the rising wedge. The RSI is bullish and not extreme with a MACD signal line that is rising and a positive histogram. There is resistance at 153.25 and a target of 155 before 157.46. Support lower is found at 150 and 147.10. Upside Bias with Caution.
As the markets move full force into March Equities are looking more like a Lamb and the Dollar Index the Lion. Elsewhere Gold and Crude Oil are set up to continue lower with a chance of Gold consolidating. US Treasuries are also consolidating within the short term downtrend. The Shanghai Composite is back moving higher while Emerging Markets are biased to the downside with a risk of consolidation continuing from late this week. Volatility looks to remain low keeping the wind at the back of the Equity Index ETF’s SPY, IWM and QQQ. Their charts continue to be biased to the upside but are adding topping candles on the weekly views. The Exception is the QQQ that is almost imperceptibly moving higher in the longer time frame. US Treasuries driving higher and joining a strong Dollar would be the most troublesome scenario for Equity bulls. 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 since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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