SPY Trends and Influencers September 12, 2015

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 suggested heading into the Holiday shortened week that the equity markets had seen consolidation following the damage of the prior week, and traders were lining up on both sides looking for a break.

Elsewhere looked for Gold ($GLD) to continue lower while Crude Oil ($USO) had a short term bias to the upside. The US Dollar Index ($UUP) continued in consolidation with an upward bias while US Treasuries ($TLT) were also biased higher in the short term. The Shanghai Composite ($ASHR) and Emerging Markets ($EEM) were biased to the downside.

Volatility ($VXX) looked to remain elevated keeping the bias lower for the equity index ETF’s $SPY, $IWM and $QQQ into next week. Their charts all showed short term consolidation in a tightening range as all correlations went toward 1.0 in the crisis or panic. The longer charts showed the damage to be limited so far though. The QQQ looked the strongest with the IWM at support and the SPY most vulnerable.

The week played out with Gold continuing lower while Crude Oil seemed to have found support and consolidated. The US Dollar pulled back in consolidation while Treasuries continued the drift lower. The Shanghai Composite settled into consolidation along with the Emerging Markets.

Volatility continued to hold over the key 22 level suggesting there is no safety yet. The Equity Index ETF’s all started higher Tuesday but then failed to gain any further ground and moved sideways. What does this mean for the coming week? Lets look at some charts.

SPY Daily, $SPY
spy d

The SPY started the week with a gap higher creating yet another island bottom on the rising support. Wednesday tested resistance then and failed, pulling back in a bearish engulfing candle setting up for a possible ugly Thursday. But that did not come. Instead the SPY held and moved up, with follow through Friday. Still no real show of strength other than at support.

The ascending triangle is getting narrow and a break to the upside would be quite bullish. Underneath is still not real trouble until a new low comes. The RSI on the daily chart continues a slow rise, but remains under the mid line while the MACD is crossed up and rising, a positive sign.

The weekly chart shows the tightening triangle is meeting resistance under the former rising trend support now acting as resistance and at the 100 week SMA. The RSI on this timeframe hit oversold territory and may be trying to turn back higher, while the MACD continues down.

A positive RSI reversal is in play on this time frame that would target a move marginally to new highs. There is resistance higher at 198 and 199.50 followed by 200 and 202.40 before 204. Support lower may come at 196 and 194.30 before 191.60 and 190.50. Continued Tightening Consolidation with a Short Term Upward Bias.

SPY Weekly, $SPY
spy w

Heading into September Options Expiration the series of higher lows on the short term charts are showing some promise for equities. Elsewhere look for Gold to continue lower while Crude Oil consolidates building a bull flag. The US Dollar Index is also consolidating with a short term downward bias while US Treasuries are biased lower. The Shanghai Composite and Emerging Markets look to continue their consolidation with a bias lower.

Volatility looks to remain elevated but continuing the leak lower, with a possibility of a reversion to normal levels soon. This would lighten the bias lower for the equity index ETF’s SPY, IWM and QQQ, and work toward no bias. The ETF’s themselves are showing short term consolidation with reversal signs after a plunge. But the move out of consolidation could be in either direction so a wait and see approach with an upward short term bias is my view.

Longer term a break of consolidation to the upside would be quite bullish. The QQQ remains the strongest of the indexes with the IWM and SPY showing bigger risk to the downside. Use this information as you prepare for the coming week and trad’em well

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