SPY Trends and Influencers October 26, 2013
- Posted by Greg Harmon
- on October 26th, 2013
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 week, the markets were behaving strongly but showed the first signs of being extended Friday. It looked for Gold ($GLD) to continue to bounce in the downtrend while Crude Oil ($USO) continued lower. The US Dollar Index ($UUP) was set up to continue lower while US Treasuries ($TLT) were poised to show if they really want to reverse higher at resistance. The Shanghai Composite ($SSEC) looked to continue lower in the uptrend while Emerging Markets ($EEM) moved higher. Volatility ($VIX) looked to remain low and possibly continue lower keeping the wind at the backs of the US Equity markets. The $SPY, $IWM and $QQQ were all looking very strong on the intermediate timeframe but with Evening Stars to end the week might need to close the gaps lower before continuing to advance.
The week played out with Gold moving higher while Crude Oil continued the drift lower. The US Dollar made a lower low and is near potential support while Treasuries made a higher high. The Shanghai Composite moved lower making a lower low as Emerging Markets topped at resistance and reversed. Volatility held at last weeks lows. The Equity Index ETF’s all made new highs before confirming topping patterns mid week, but then reversing back higher. What does this mean for the coming week? Lets look at some charts.
The SPY started the week with a Doji followed by and Evening Star pattern, both suggesting a pullback, only to reverse back higher to end the week at new All-Time Highs. With the short ‘pullback’ complete the target higher on a Measured Move is to 185.36. There are targets on the way from the Fibonacci extension of the last move from 163.05 to 173.60 at 176.45 and 177.93 followed by 179.11 and 185.63, corresponding to the 138.2%, 150%, 161.8% and 200% extensions. Note that the 200% extension matches the Measured Move. The RSI is bullish and strong running along the 70 level on the daily chart with a MACD that is rising, both supporting more upside price action. On the weekly view the move higher also shows strong with a finish at the top of the candle. The RSI is bullish and strong and the MACD is turning up and about to cross up. Very bullish. There is support lower at 173.60 and 170.90. Continued Uptrend.
Moving into the Halloween week and ending the seasonally scary October the markets are looking strong. Specifically look for Gold to continue higher while Crude Oil maybe ready for a bounce after a downtrend. The US Dollar Index remains in a downtrend but at support so a reversal is possible, while US Treasuries are poised to continue higher. The Shanghai Composite looks weak and ready to continue lower while Emerging Markets may consolidate in the pullback in the uptrend. Volatility looks to remain low and unimportant keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts are showing that the SPY is strong and ready to move higher while the IWM and QQQ are consolidating. This could be the start of another round of rotation from the IWM and QQQ into the large cap stock in the SPY and Dow Jones Industrials. 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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