SPY Trends and Influencers February 27, 2016

• Posted by Greg Harmon
• on February 27th, 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 which heading into the February Operations Expiration Week, and moving past February Options Expiration saw the equity markets showing some strength in the week but also with a need for more upside before starting to talk about a reversal.

Elsewhere looked for Gold ($GLD) to consolidate in its recent uptrend while Crude Oil ($USO) turned lower in the consolidation zone in its downtrend. The US Dollar Index ($UUP) looked better to the downside in its broad consolidation while US Treasuries ($TLT) were biased lower short term in the uptrend. The Shanghai Composite ($ASHR) looked to continue the slow move higher in the downtrend and Emerging Markets ($EEM) looked to consolidate their move up in their downtrend.

Volatility ($VXX) looked to remain elevated but biased to the downside starting to ease the bias lower for the equity index ETF’s $SPY, $IWM and $QQQ. Their charts all showed short term digestion of the large moves higher and possible exhaustion short term, which could resume the downward path.

The week played out with Gold probing higher and lower but spending the week moving sideways while Crude Oil bumped higher and held. The US Dollar also bucked the trend (pun intended) and moved higher while Treasuries made a lower high and pulled back. The Shanghai Composite crept higher but then crapped the bed Friday while Emerging Markets bounced around in a tight range.

Volatility started higher but then reversed to the low point of the year. The Equity Index ETF’s started the week higher but got whacked Wednesday before a massive reversal to end the week higher. The SPY and IWM broke out out of the 2016 range to the upside while the QQQ is close but lagging slightly behind. What does this mean for the coming week? Lets look at some charts.

SPY Daily, $SPY

The SPY gapped higher to resistance to start the week. This brought hopes of a break out of the two month malaise as it made a higher high. But Tuesday pulled back. The gap down Wednesday brought a short term panic, but it was bought quickly as it hit the 20 day SMA. This was the second bullish point in the week, making a higher low.

Thursday continued higher making another higher high and definitively over the two month resistance. But then Friday gapped higher and sold off all day. Price did hold over the break out though, the third positive. The RSI in the daily chart is rising and near a move into the bullish zone while the MACD rises and has gone positive. Continuation would look for a “W” to complete to about 207.

On the weekly chart the candle has clearly moved out of the consolidation zone since the fall that started the year. The RSI on this timeframe is rising but remains under the mid line, in the bearish zone with the MACD turning up but not crossed yet. The whole formation looks like bottoming with the volume falling before the move higher. There is resistance above at 196 and 198.5 followed by 199 and 200 before 201.75. Support lower comes at 194.50 and 191.50 followed by 189.50 and 188. Short Term Bias Higher.

SPY Weekly, $SPY

With just a Leap Day left in February the Equity markets look ready to spring higher. Elsewhere look for Gold to continue to consolidate in its uptrend while Crude Oil consolidates the recent move higher. The US Dollar Index also looks to continue to move sideways but with an upward bias short term while US Treasuries are showing signs of topping in their uptrend. The Shanghai Composite seems ready for more downside, at least in the short term, while Emerging Markets are biased to the upside next week.

Volatility looks to continue the move lower towards normal levels easing the pressure for the equity index ETF’s SPY, IWM and QQQ. Their charts all look better to the upside in the short term, with very constructive movement higher out of the 2016 range for the SPY and IWM. The QQ lags behind but only just slightly. Use this information as you prepare for the coming week and trad’em well.

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