SPY Trends and Influencers: Monthly Edition July into August 2014
- Posted by Greg Harmon
- on August 1st, 2014
A monthly excerpt from the Premium subscriber version covering all 13 markets.
Last month in this space my Monthly Macro Review/Preview had the monthly outlook heading into the heart of the summer suggesting that Gold ($GLD) and Copper ($JJC) would continue the trend sideways but with a bias higher for Gold and lower for Copper. Crude Oil ($USO) and Natural Gas ($UNG) also looked to continue to move sideways, but both with an upward bias on a break. The US Dollar Index ($UUP) showed no signs of doing anything except for moving sideways while US Treasuries ($TLT) had an upward price bias in their consolidation. The Shanghai Composite ($SSEC) was finally basing after a long pullback, but basing did not mean rising soon, while Emerging Markets ($EEM) looked to continue to move higher along with the German DAX ($DAX). Volatility ($VIX) looked to remain low, but it was hard to imagine it could stay below the recent range for long. The Equity Index ETF’s $SPY, $IWM and $QQQ Were mixed with the SPY and QQQ looking strong and biased higher while the IWM was testing the top of a range, and could join them on a break higher, but ran the risk of failing. How does an additional month impact the longer term picture? Let’s take a look.
The SPY fell back a little over 1% in July but did nothing to soften the trend higher. It touched a 138.2% extension of the move lower from the financial crisis of 2008 and 2009 before the pullback. The round number of 200 over head may take a long time to achieve and then gain separation from. Price is firmly in the upper portion of the bullish Andrews’ Pitchfork though which would look for an attraction to the Upper Median Line at the top. The RSI is pulling back slightly to work off a technically overbought condition and the MACD is leveling. There is resistance at the high this month at 199.06 and support lower may come at 185 and 175. Consolidation in the Uptrend.
The monthly outlook suggests that Gold and Copper with continue to consolidate but with Copper biased higher and Gold possibly ready for the next leg down. US Treasuries continue to look better to the upside as the consolidate and the US Dollar Index continues to underwhelm moving sideways. Crude Oil is testing support so watch lower while Natural Gas continues to look better to the downside. The Shanghai Composite is getting antsy in its recent consolidation with a short term upward bias while Emerging Markets look like they may be tiring at resistance, and the German DAX consolidates it moves higher. Volatility looks like it may be ready to move and hold up off of the long bottom but has yet to test upper levels and looks to remain calm. With that backdrop the Equity Index ETF’s SPY, IWM and QQQ are mixed. The IWM is the worst and is biased lower while the SPY looks to consolidate the long run higher at best and possibly pullback a bit, while the QQQ looks strong like a freight train climbing a mountain. Use this information to understand the long term trends in Equities and their influencers as you prepare for the coming months.
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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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