SPY Trends and Influencers October 22, 2016
- Posted by Greg Harmon
- on October 22nd, 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 October Options Expiration week the equity markets continued to show some weakness, especially in the small caps. Elsewhere looked for Gold ($GLD) to consolidate with a downward bias if it resolved soon while Crude Oil ($USO) continued to plow higher. The US Dollar Index ($DXY) also looked to continue higher while US Treasuries ($TLT) continued lower.
The Shanghai Composite ($ASHR) and Emerging Markets ($EEM) looked best to continue to bide time moving sideways. Volatility ($VXX) looked to remain at low levels but creeping higher, sucking out the tailwind from the equity index ETF’s $SPY, $IWM and $QQQ. Their charts showed clear weakness in the IWM, with the SPY and QQQ a little stronger short term. The QQQ was the best looking longer term.
The week played out with Gold lifting out of consolidation to end the week up while Crude Oil started started to break its flag higher but failed late in the week. The US Dollar continued its move higher after early consolidation while Treasuries found support and bounced mildly. The Shanghai Composite drifted higher while Emerging Markets started higher but then stalled the rest of the week.
Volatility moved lower all week ending near its SMA cluster. The Equity Index ETF’s moved in narrow ranges all week, opening lower and then drifting up by mid week, with the SPY and IWM giving back most of the gains, while the QQQ held up better. What does this mean for the coming week? Lets look at some charts.
SPY Daily, $SPY
The SPY started the week moving lower. It ended the day Monday at its lower Bollinger Band®, near the low of the day. Tuesday saw a bounce back higher that stalled and reversed at the Friday open price and the 100 day SMA. A little bounce to the upside Wednesday stalled at the 100 day SMA again then pulled back Thursday and opened with a gap down Friday. That gap filled and it closed up for the week.
Sounds exciting huh? Not really, the entire range of the week was less than 2.5 points, slightly over 1%. The price remains under the 20 and 50 day SMA’s. And the daily chart shows the RSI is holding under the mid line and has turned flat. The MACD has a slowly rising slope and may be ready to cross to the upside, but is certainly not showing any strength.
The weekly chart shows a positive week with a small body consolidating candle following the down week. The RSI on the longer timeframe is holding over the mid line while the MACD is falling. There is resistance at 214 and 215 followed by 215.70 and 217. Support lower comes at 212.50 and 210.20 followed by 209 and 207.10. Consolidation with a Downward Bias Short Term.
SPY Weekly, $SPY
Heading into the last week before the election equity markets look stable long term and mixed in the short run with the QQQ leading and the SPY falling. Elsewhere look for Gold to continue to press higher short term while Crude Oil continues to show its strength. The US Dollar Index is also strong moving higher while US Treasuries are bouncing short term in their downtrend.
The Shanghai Composite continues to drift higher while Emerging Markets mark time in consolidation. Volatility looks to remain subdued and falling, adding a tailwind to the equity index ETF’s SPY, IWM and QQQ. They are mixed short term though with the QQQ moving higher the IWM flat and the SPY at risk for more downside. Use this information as you prepare for the coming week and trad’em well.
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Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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