SPY Trends and Influencers May 18, 2013

Last week’s review of the macro market indicators suggested, as we headed into the options expiration week for May that the equity markets remain strong. Look for Gold ($GLD) to continue its correction while Crude Oil ($USO) might consolidate with an upside bias. The US Dollar Index ($UUP) seemed content to move sideways but now with a upward bias as US Treasuries ($TLT) moved lower in the broad consolidation zone. The Shanghai Composite ($SSEC) was building towards a break of consolidation higher while Emerging Markets ($EEM) looked to pullback in their uptrend. Volatility ($VIX) looked to remain subdued keeping the wind at the backs of the equity index ETF’s $SPY, $IWM and $QQQ, despite their moves to new highs. Their charts agreed with a continued upward bias but with the IWM the strongest on the short term basis and the QQQ strongest on the intermediate term. Rotation into small caps might result.

The week played out with Gold continuing lower while Crude Oil bounced and moved higher in the range. The US Dollar took that upward bias and ran while Treasuries bounced around in a lower range. The Shanghai Composite continued to consolidate before popping Friday while Emerging Markets went flat as a pancake, consolidating. Volatility remained stable before making lower lows Friday. With this positive backdrop the Equity Index ETF’s continued their march higher with the SPY and IWM making new all-time highs and the QQQ multi-year highs. 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 d
SPY Weekly, $SPY
spy w

The SPY continued higher on the week ending at new all-time highs. The steps higher off of the November low have averaged between 11 and 14 points and this move would end at 167.50 if it obeyed that limit. Pullbacks have averaged about 6 points. As it stands today the RSI is bullish and only just at the 70 level, technically overbought, but leveling. Not a problem yet. The MACD is continuing to rise as well with no sign of fading. These point higher still on the daily chart. This market does not want to make it easy to get in on this timeframe. Out on the weekly chart the move up off of the wedge break continues with the RSI reaching multi-year highs and the MACD rising to new highs as well. Some cautious signals here as well. There is no resistance higher and support below is found at 163 and 159.72. Continued Upside, But with Caution in the Short Term.

Running into the Memorial Day Weekend the equity markets continue to look strong but the potential for rotation into the small caps noted last week still exists. Look for Gold to continue the trend lower while Crude Oil is biased higher in its neutral channel. The US Dollar Index sins on the verge of a full blown bullish move higher while US Treasuries are biased lower. The Shanghai Composite also looks to be ready to move back higher while Emerging Markets are biased to the downside as they consolidate. Volatility looks to remain a non factor and should be ignored until it breaks above 22 keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ, despite the moves to new highs. Their charts agree although the SPY is showing the most signs of caution as the IWM and QQQ plow forward. Use this information as you prepare for the coming week and trad’em well.

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