SPY Trends and Influencers January 4, 2014
- Posted by Greg Harmon
- on January 4th, 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 year closes the markets looked ready for a rest after a strong showing all year. it looked for Gold ($GLD) to consolidate or continue in the trend lower while Crude Oil ($USO) continued to the upside. The US Dollar Index ($UUP) looked to continue in the consolidation with an upward bias while US Treasuries ($TLT) were ready for the big one to the downside. The Shanghai Composite ($SSEC) and Emerging Markets ($EEM) remained biased to the downside with consolidation a possibility for the Chinese market. Volatility ($VIX) looked to remain very low keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ, despite the VIX being biased higher. The individual charts of the equity indexes showed the SPY looking strongest with the IWM and QQQ starting what could be pullbacks and over extended.
The week played out with Gold starting lower before finding support and bouncing higher while Crude Oil pulled back sharply. The US Dollar found some footing and moved higher while Treasuries held at support. The Shanghai Composite continued to consolidate and Emerging Markets met resistance and pulled back. Volatility moved higher but stalled at the Simple Moving Averages (SMA). The Equity Index ETF’s reacted with the SPY making a new all-time high and QQQ a new 13 year high before all three, including the IWM, ended the week lower. What does this mean for the coming week? Lets look at some charts.
The SPY ended 2013 at a new all time high before pulling back to start 2014. It closed the gap from the day after Christmas on the pullback and has yet to retest the break out level that started that week. The RSI on the daily chart is starting to level well above the mid line with a MACD that has yet to cross as it has pulled back slightly. There is nothing bearish here yet unless you are purely a day trader looking at Monday. The weekly chart shows consolidation at the highs. The RSI is holding at the 70 level in bullish territory with a MACD that is leveling. The price is a bit extended from the 20 week SMA, but not extreme. There is resistance at 184 and 184.69 with Measured Move targets at 185, 186 and 193 higher that could give it pause. Support lower is found at 181.80 and 180.40 followed by 177.70. Consolidation or Pullback in the Uptrend.
As the first full week of 2014 begins the markets are showing signs of rotation again. Look for Gold to continue to bounce in its downtrend while Crude Oil continues lower. The US Dollar Index looks content to move sideways with an upward bias while US Treasuries consolidate with a bias lower. The Shanghai Composite and Emerging Markets are biased to the downside with the possibility that the Chinese market continues to consolidate. Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts show that the SPY and IWM are consolidating their gains with slight pullbacks and look solid, with the slight edge to the IWM, while the QQQ is pulling back and may do so a bit longer still. 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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