SPY Trends and Influencers December 17, 2016


A weekly excerpt from the Macro Review analysis sent to subscribers on 10 markets and two timeframes.

Last week’s review of the macro market indicators noted that heading into December Options Expiration and the FOMC meeting, US Equities looked strong but perhaps extended on the short term. Elsewhere looked for Gold ($GLD) to continue its downtrend while Crude Oil ($USO) continued to move higher. The US Dollar Index ($DXY) also looked better to the upside while US Treasuries ($TLT) continued to be biased lower.

The Shanghai Composite ($ASHR) and Emerging Markets ($EEM) both were biased to the upside with risk Emerging Markets being only a short term move. Volatility ($VXX) looked to remain subdued and abnormally low keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ. Their short term charts suggested possible exhaustion as they were overbought, but longer term they looked very strong. The exception was the QQQ which was stuck in a range but now at the top end. Perhaps it would benefit from a pullback in the other index ETFs.

The week played out with the FOMC meeting as the catalyst. Gold resumed its downward path after the FOMC meeting while Crude Oil started the week with a gap up and then gave it back all week long. The US Dollar also resumed its path higher after the rate decision while Treasuries held in a tight range for the week. The Shanghai Composite gapped lower Monday and then drifted down a bit more through the week while Emerging Markets broke their short term consolidation Wednesday and settled lower at support.

Volatility stayed in a very tight range all week, a sign of just how confident market was of a rate hike. The Equity Index ETF’s saw a move to new all-time highs in the SPY and QQQ early in the week, but then no follow through. They both retreated slightly by Friday into the options expiration. The IWM did not make a new high and drifted lower early in the week, and then bounced back slightly into the end of the week. What does this mean for the coming week? Lets look at some charts.

SPY Daily, $SPY

The SPY came into the week after a hard charge to the upside the previous week to new all-time highs. Monday saw a doji candle bring it back within the Bollinger BandsĀ® and then it jumped to another new high Tuesday, but back out of the Bollinger Bands. Wednesday the SPY held steady until the FOMC statement and then started to move lower. It tried to recover Thursday but could not hold the gains and then continued to the downside Friday ending with a near pin at 225 for Options Expiration.

During the course of the week the RSI reset lower out of overbought territory and the MACD pulled back, but has yet to cross down. The price is also still over the 20 day SMA. It looks like a slight pullback from this timeframe, nothing concerning yet. And a reversal Monday setting a short term low would give an upside target to 234.

The weekly chart shows an upper shadow on a candlestick that moved back to the Bollinger Bands. The RSI on this timeframe is bullish and trending higher while the MACD is rising. There is resistance now at 226.50 and the intraday all-time high at 228.34. Support lower may come here at 225 or 224 followed by 221.75 and 220. Pullback in Uptrend.

SPY Weekly, $SPY

With the FOMC and December Options Expiration in the rear view mirror, Equity Markets remain strong at all-time highs with some minor digestion. Elsewhere look for Gold to continue lower while Crude Oil is set to push higher out of consolidation. The US Dollar Index is poised for more upside while US Treasuries continue to be biased lower. The Shanghai Composite and Emerging Markets are pulling back to the downside but it looks to be a digestive move for the Chinese market.

Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. All are in short term pullbacks, that look digestive for the SPY and IWM, and perhaps the QQQ as well which has at this point failed in its break out attempt. Use this information as you prepare for the coming week and trad’em well.

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