SPY Trends and Influencers December 10, 2011

Last week’s review of the macro market indicators lead into the week with the market looking very strong, despite the pullback Friday. Gold ($GLD) and Crude Oil ($USO) both were poised to move higher with a chance that Gold consolidates its gains. The US Dollar ($UUP) and US Treasuries ($TLT) were still in uptrends but facing support levels nearby that could change the trend. The Shanghai Composite ($SSEC) looked very broken while Emerging Markets ($EEM) were ready to continue higher. Volatility ($VIX) looked to remain in a trend lower but might consolidate. All this led to an environment for the Equity Index ETF’s $SPY, $IWM and $QQQ to continue higher. News could again provide exogenous shocks that the charts did not read, with it showing up in the US Dollar and US Treasuries first. Keep watching them as the captains steering the ship.

The week saw Gold consolidate among the Simple Moving Averages (SMA) while Crude Oil bucked the charts and traded lower until rebounding Friday. The US Dollar consolidated while Treasuries traded higher before pulling back to end the week. The Shanghai Composite continued its move lower to new lows while Emerging Markets consolidated their gains, holding most of the gap up from last week. Volatility did continue to slide lower. The Equity Index ETF’s bounced around in some wide range days but finished the week marginally higher. What does this 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 consolidated early in the week but with foretelling topping candles that led to a strong move lower Thursday, only to have it reversed Friday. The Relative Strength Index (RSI) remained bullish during this action while the Moving Average Convergence Divergence (MACD) indicator held positive but is fading lower on the daily chart. The weekly chart printed a Hanging Man back at the top of the flag from the failed break down lower. The RSI is trying to move bullish, over the mid line and rising, to join the MACD growing more positive. It is back in a range between 118.50 and 128.80. Resistance comes higher over 128.80 at 131 and 135.80. Support below comes at 124.55 and 122.60 on the way to 118.5. In a Range with an upside bias.

As we head into Options Expiration week the markets look to be a bit more settled. Gold looks to consolidate in a range while Crude Oil is biased higher. The US Dollar Index and Treasuries are better to the upside but the trend in Treasuries is getting very weak so it could consolidate or pullback. The Shanghai Composite is on it s death bed while Emerging Markets look to continue lower. Volatility looks to continue its drift lower. This mix sets up for the Equity Index ETF’s SPY, IWM and QQQ to be biased to the upside slightly and their charts concur. The US Dollar Index strength will be the biggest risk to Equity upside in the coming week with Treasuries looking more peaked. If Treasuries gain strength then the slight Equity upside bias will be negated. Use this information as you prepare for the coming week and trade’m well.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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