SPY Trends and Influencers September 10, 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 as summer vacations ended and the back to work mentality began, the equity markets seemed rested and ready. Elsewhere looked for Gold ($GLD) to continue higher short term while Crude Oil ($USO) also bounced and moved higher. The US Dollar Index ($DXY) looked to move higher in the broad consolidation while US Treasuries ($TLT) consolidated in their uptrend.

The Shanghai Composite ($ASHR) looked to continue a digestive drift lower while Emerging Markets ($EEM) reversed back to the upside. Volatility ($VXX) looked to continue abnormally low keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ. Their charts showed the SPY and QQQ continuing in consolidation, with the IWM breaking to the upside, taking the lead.

The week played out with Gold pushing higher before drifting back down to end the week little changed while Crude Oil continued higher but but gave some back Friday. The US Dollar started the week lower but rallied to recover most by Friday close while Treasuries moved to the downside. The Shanghai Composite moved higher slowly while Emerging Markets jumped higher early only to give up all the gains and more on Friday.

Volatility started the week continuing to drift lower but made a massive move to the upside Friday. The Equity Index ETF’s all started the week in a sideways and upward drift, with the QQQ making a new all-time high finally after 16 and a half years. But Friday saw the bottom fall out as they all lost over 2%. The first move over 1% on over 50 days. What does this mean for the coming week? Lets look at some charts.

SPY Daily, $SPY

The SPY continued the stable tight range at the start of the week, pressing back to the top of the range and over the 20 day SMA. But Friday ended that quickly. What started as a gap down to the bottom of the range gathered steam all day as volume picked up. It ended up closing down 2.39% on volume not seen since the Brexit reaction. It was a 97% down day when the dust settled, a very rare occurrence, on a bearish Marubozu candle.

The daily chart shows that momentum decayed rapidly. The RSI fell into the bearish zone and nearly went straight to being technically oversold. The MACD had been falling and accelerated its pace down. The price also fell well outside of the lower Bollinger Band®, which can often bring a bounce. The question will be if it is a short term bounce or a reversal.

Looking out at the weekly chart it was also a bearish Marubozu for the week. The RSI on this timeframe is still in the bullish zone but pulling back to the mid line while the MACD is about to cross down. These support more downside. There is support lower at 212.50 and 211 before 210.20 and 208.50. Resistance above now stands at 214 and 215.70 followed by 217 and 218 before 219 and 219.50. Continued Short Term Downside.

SPY Weekly, $SPY

Heading into September Options Expiration the Equity Indexes are retrenching. Elsewhere look for Gold to move lower in its short consolidation over 1310 while Crude Oil consolidates sideways. The US Dollar Index looks to move higher in the broad consolidation while US Treasuries are biased lower. The Shanghai Composite looks to continue to trend slowly higher while Emerging Markets are biased to the downside in the short term.

Volatility looks to remain at the top of the normal range adding the bias lower for the equity index ETF’s SPY, IWM and QQQ. Their charts all look better to the downside in the short run, but with the SPY and QQQ well outside of their Bollinger Bands, so perhaps ready for a bounce first. The IWM is sitting on its lower Bollinger Band, a good place to bounce if it wants to. Use this information as you prepare for the coming week and trad’em well.

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