SPY Trends and Influencers December 6, 2014

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, as the calendar turned to December that the Equity markets were showing signs of divergence or rotation but with continued strength. Elsewhere looked for Gold ($GLD) to continue lower, resuming its downtrend while Crude Oil ($USO) also continued lower. The US Dollar Index ($UUP) and US Treasuries ($TLT) looked strong though and were biased to continue to the upside. The Shanghai Composite ($PEK) was also strong and looked to continue higher while Emerging Markets ($EEM) were consolidating in what may be a bearish pattern. Volatility ($VXX) looked to remain subdued keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ. Their charts showed continued strength in the QQQ, with the SPY a bit stretched short term but looking good on the intermediate timeframe, while the IWM continued to consolidate in the longer consolidation range.

The week played out with Gold running sideways but falling to end the week lower while Crude Oil reversed back lower as well. The US Dollar resumed its move higher while Treasuries found trouble at that overhead resistance and pulled back before a bounce. The Shanghai Composite found rocket fuel and exploded higher while Emerging Markets dropped early and then consolidated at the low. Volatility made a new two month low and still looks weak. The Equity Index ETF’s drifted higher with the SPY ending at a new alltime high and the QQQ less than a point away. Even the IWM improved on the week after a shaky start. What does this mean for the coming week? Lets look at some charts.

SPY Daily, $SPY
spy d
SPY Weekly, $SPY
spy w

The SPY started the week with a gap down below the rising trend line. But that was just enough to fill the prior gap higher from the previous Monday. From that point it moved higher, filling the new gap and closing the week at a new all-time high close. The back to back doji closes will give some pause, but technically the Friday doji confirmed the Thursday one higher. The daily chart shows the SMA’s continuing to trend higher with the 20 day SMA nearby now, but the others well below. The RSI on this timeframe is in the bullish zone and just moving horizontally along the overbought line. The MACD is actually drifting slowly lower. No extreme momentum readings here. Moving out to the weekly chart the doji last week was confirmed higher. Some will not the confirmation came from an Evening Star, also a possible reversal candle. But the RSI and MACD are both rising on this timeframe. There is no resistance higher but the 138.2% extension of the down leg from September into October is above at 209.53 while the 150% is at 211.89 and 161.8% at 214.25. All could be focal points for traders. Support lower comes at 206.80 and 205.70 followed by 204.35 and 203.25. Uptrend Continues.

Heading into next week equities broadly look better higher but signs of rotation are showing up. Elsewhere look for Gold to continue the short term channel higher in the downtrend while Crude Oil may be finding a bottom at last. The US Dollar Index continues to be strong as US Treasuries are biased lower in the uptrend. The Shanghai Composite looks to continue its uptrend, but perhaps with a short term pause while Emerging Markets are consolidating in a bear flag and biased to the downside. Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. The SPY looks good on the longer timeframe with the IWM starting to move out or a tight range higher. The QQQ looks a bit tired in the short run and money may be rotating out of it to the IWM now. Use this information as you prepare for the coming week and trad’em well.

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