SPY Trends and Influencers July 28, 2012

• Posted by Greg Harmon
• on July 28th, 2012

Last week’s review of the macro market indicators saw heading into the next week Gold ($GLD) looked to continue to consolidate in the downtrend with Crude Oil ($USO) looking higher with a chance of consolidation. The US Dollar Index ($UUP) was poised to continue higher with US Treasuries ($TLT) leading them up. The Shanghai Composite ($SSEC) and Emerging Markets ($EEM) looked biased to continue lower with Emerging Markets potentially consolidating. The Volatility Index ($VIX) pointed to continued lower fear allowing for the Equity Indexes, $SPY, $IWM and $QQQ to move higher. The US Dollar and Treasuries suggested that this would not happen though. This correlation between Treasuries, the Dollar and Equities has been broken for a while but will likely reestablish with a divergence soon. The charts of the Equity Indexes showed that they remain biased higher in what may be bear flags. Also presenting a cautious view.

The week played out with Gold consolidating before a big move higher while Crude Oil pulled back early before moving back higher. The US Dollar and Treasuries made new highs before pulling back ending the week lower. The Shanghai Composite did continue lower while Emerging Markets found a bottom and rose. Volatility popped early only to recede to nearly unchanged. Through this reversal the Equity Index ETF’s also started lower but had a strong finish to the week higher. 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 Weekly, $SPY

The SPY found support on the 50 day Simple Moving Average (SMA) and moved higher in a couple of gap moves finishing the week with a strong bullish candle to a new higher high. The series of higher highs and higher lows continues since the June bottom, very positive. The Relative Strength Index (RSI) on the daily chart is touching near 63, where it has failed the previous two attempts with a Moving Average Convergence Divergence indicator (MACD) that is about to cross to positive. These support a move higher. The weekly picture shows a strong bullish engulfing candle making a new high and approaching the highs from early in the year. The RSI is trending higher and on the verge of turning bullish on this time frame with a MACD that is also about to cross to positive. Support for further upside on this time frame as well. There is resistance higher at 140 and 141.48 before it has free air higher and a Measured Move to 149. Support lower is found at 134.12, 131.46 and 129.25 and a move below 126.48 signals a reversal of trend lower. Continued Upside.

Heading into the height of Summer and the Olympic fortnight the markets are looking up, although not all equally. Gold and Crude Oil are looking to continue to move higher with a chance that Gold consolidates. The US Dollar Index and Treasuries are poised to continue their pullbacks within the uptrend. The Shanghai Composite is heading lower while Emerging Markets may consolidate their recent move higher before continuing. Volatility looks to remain subdued allowing for the Equity ETF’s SPY, IWM and QQQ to continue higher. The bias in the US Dollar Index and Treasuries support more upside for equities as well. Looking at their charts shows that the SPY is the strongest and looks to continue higher while the QQQ is next followed by the IWM, both of which need to break above consolidation areas to look more healthy to the upside. Use this information as you prepare for the coming week and trade’m well.

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