SPY Trends and Influencers December 3, 2011

• Posted by Greg Harmon
• on December 3rd, 2011

Last week’s review of the macro market indicators looked as November turned into December as if Santa Claus was sending a message to Americans as he brings a rally only to the US Dollar ($UUP) and US Treasuries ($TLT). Gold ($GLD) and Crude Oil ($USO) looked ready to continue lower, while the Shanghai Composite ($SSEC) and Emerging Markets ($EEM) do the same in their downtrends. Volatility ($VIX) looked to remain in the lower end of the elevated channel but with the first sign of a move higher. All of these combined to produce a horrible environment for the Equity Index ETF’s $SPY, $IWM and $QQQ. The IWM and QQQ looked the most extended so looking for the SPY to catch up a bit in the coming week. The US Dollar and Treasuries looked to continue to drive the action with any reversal in them benefiting Equities.

The week began with Gold and Oil rising moderately, and the US Dollar and Treasuries made slightly lower. The Shanghai Composite and Emerging Markets were sideways to a little better. Volatility sat in its higher range. The Equity Index ETF’s were slightly higher as well. Then coordinated intervention hit and it became clear that Santa was just pulling a prank ahead of the real gift giving. Gold and Oil jumped higher while the Dollar and Treasuries sank. All Equities rose dramatically and Volatility fell off. What does this turn around mean for the coming week? Lets look at some charts.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY had a dramatic week gaining over 10 points before giving some back on Friday. The up move stalled at the 200 day Simple Moving Average (SMA) which is also very near the extended centerline of the symmetrical triangle that it broke down from in mid November. This was after reaching the target for the break down near 116. The daily chart shows the Relative Strength Index (RSI) now flattening in its trend higher as it approaches 60 and the Moving Average Convergence Divergence (MACD) indicator crossing positive, both supporting more upside. The weekly chart shows the MACD that was fading now growing more positive and the RSI moving back higher towards bullish territory. The price action on the weekly chart shows it very nearly a Bullish Kicker pattern, also suggesting more upside. Resistance higher comes at 125.80 and then 129.42 followed by 131.10. A move over 129.42 triggers a bullish trend with a higher high. Support lower stands at 123.50 followed by 122.5 and 118.50. A move under 116.20 puts it in a bearish trend. For next week look for continued upside.

Heading into next week the market looks very strong, despite the pullback Friday. Gold and Crude oil both are poised to move higher with a chance that Gold consolidates its gains. The US Dollar and US Treasuries are still in uptrends but facing support levels nearby that could change the trend. The Shanghai Composite looks very broken while Emerging Markets are ready to continue higher. Volatility looks to remain in a trend lower but may consolidate. All this leads to an environment for the Equity Index ETF’s SPY, IWM and QQQ to continue higher. News may again provide exogenous shocks that the charts do not read, but this may show up in the US Dollar and US Treasuries first. Keep watching them as the captains steering the ship. Use this information as you prepare for the coming week and trade’m well.

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