SPY Trends and Influencers June 18, 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 June Options Expiration week and the FOMC meeting saw the equity indexes were taking a little breather to the downside, after big moves. It would be troublesome if it turned into more. Elsewhere looked for Gold ($GLD) to continue higher in the short term while Crude Oil ($USO) continued its trend higher. The US Dollar Index ($UUP) continued to trend lower in the short term in broad consolidation while US Treasuries ($TLT) were breaking out higher.

The Shanghai Composite ($ASHR) continued to hold steady in the downtrend and Emerging Markets ($EEM) were biased to the downside short term in their broad consolidation. Volatility ($VXX) looked to remain low but could creep up a bit keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ, but with less support than previously. Their charts were set to continue to digest the recent moves higher, with the QQQ weakest and then the IWM and the SPY holding well on the longer term charts.

The week played out with Gold drifting higher early before a set back late in the week while Crude Oil pulled back in it uptrend. The US Dollar held in a tight range while Treasuries broke out higher before a pull back Friday. The Shanghai Composite fell back early and then recovered much of the drop, staying in a tight range while Emerging Markets gapped lower Monday and then held all week.

Volatility made a new three and a half month high Monday and held there the rest of the week. The Equity Index ETF’s all started the week continuing their moves lower in digestion. The SPY and the IWM found support and moved in tight ranges at higher lows the rest of the week, while the QQQ just continued lower. What does this mean for the coming week? Lets look at some charts.

SPY Daily, $SPY
spy d

The SPY gapped down Monday to retest the April high, printing a doji. Tuesday saw more downside and Wednesday a Spinning Top holding over the 50 day SMA. Thursday spiked lower and recovered leaving a long lower shadow, but then another gap down Friday did not fill. Friday’s candle was a second with a long lower shadow, and an inside candle, or Harami, often a reversal signal. These shadows are often signs of exhaustion in selling.

The daily chart shows that the Bollinger BandsĀ® are squeezing in, mostly from below, as the RSI dips below the mid line. It is still in the bullish zone but falling. The MACD is crossed down and falling. The bulk of the evidence on this time frame suggest more downside. On the weekly chart the two doji’s are confirming to the downside. There is a lot of prior activity down to the 203 area where the 50 and 100 week SMA’s are meeting the 20 week SMA. That could act as a buffer to the downside.

The RSI on the weekly chart remains over the mid line but short of a move over 60 into the bullish zone, while the MACD is kinking down in its uptrend. More neutral on this timeframe. There is resistance at 207.60 and 208.50 followed by 210.75 and 211.50 then 213 and the all-time high 213.78. Support lower comes at 206 and 203.75 followed by 201.50. Consolidation with a Short Term Downward Bias.

SPY Weekly, $SPY
spy w

The June FOMC meeting and Options Expiration gave the market a shock to the downside, but not deep. Now it can look forward to the Brexit vote and then summer. Elsewhere look for Gold to consolidate with an upward bias while Crude Oil moves higher after a digestive pullback. The US Dollar Index looks to consolidate sideways at the bottom of the range while US Treasuries are biased higher. The Shanghai Composite and Emerging Markets are running in place with the Chinese market biased to lean lower and Emerging Markets higher.

Volatility looks to remain near the top of the lower range keeping the bias lower for the equity index ETF’s SPY, IWM and QQQ, mildly. Their charts suggest intermediate term consolidation with a short term downward bias for the SPY and QQQ, but the IWM looking a bit stronger. Use this information as you prepare for the coming week and trad’em well.

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