SPY Trends and Influencers January 7, 2012

Last week’s review of the macro market indicators looked moving into the New Year the theme for the week was consolidation or a movement with in the range with a few exceptions. Gold ($GLD) may move higher but in a downtrend while Crude Oil ($USO) holds the broad range. The US Dollar Index ($UUP) and Treasuries ($TLT) looked to continue their upside bias but in slow ranges. A violent move from either would likely continue to drive the Equity Markets. The Shanghai Composite ($SSEC) looked to consolidate around the 2200 level while Emerging Markets ($EEM) tighten their range. Volatility ($VIX) looked to creep up in the downtrend. These all created an environment for Equities to move lower. The very short term aspects of the $SPY, $IWM and $QQQ charts agreed but suggest a continued sideways to slightly higher move after a few days.

For the week Gold did move higher but could not crack resistance while Crude Oil broke the range only to get sucked back in. US Treasuries ended up getting whacked lower but not enough to change the bullish bias while the US Dollar Index marched higher. The Shanghai Composite continued to consolidate just below 2200 but Emerging Markets popped early and faded, staying in the recent range. Volatility ticked lower instead of continuing up. Lower Volatility with weaker Treasuries combined to send the Equity Index ETF’s SPY, IWM and QQQ higher on the week. It is worth noting that the Equity strength happened despite a rising US Dollar. There may be a change of character occurring. 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 gapped higher on Tuesday and held the gap all week, consolidating at previous resistance at 128.40-128.60. On the daily chart the RSI has moved barely into bullish territory while the MACD is positive but flat. The weekly chart shows a doji star print, breaking above the downtrend support line (previously resistance), continuing to follow the Fibonacci Arc higher. The RSI and MACD are increasing slightly supporting more upside, but that doji signals indecision and is right at the October high. There is resistance above 128.60 at 130 and then 133.30 and 135. Support comes lower at 126.20 followed by 124.20 and 122. The trend remains higher in the short to intermediate term and a move over 129 will get many people bullish. A move below 122 will have bears piling in. Consolidation to Upside Bias

With one week in the books the tone of the Equity markets is becoming positive. Several areas are still likely to consolidate further before moving. Gold is one of them and it looks likely to move lower when done consolidating, while Crude Oil is biased higher. US Treasuries look to break consolidation higher while the US Dollar Index just keeps rocketing higher. The Shanghai Composite and Emerging Markets look to break their ranges to the downside, while Volatility continues lower. These factors combine to create an environment where there is a slight upward bias to equities, given the recent correlation with the US Dollar Index, and the charts of the Equity Index ETF’s SPY and QQQ reflect that bias. The IWM is more neutral. Use this information as you prepare for the coming week and trade’m well.

Join the Premium Users and you can view the Full Version with 20 detailed charts and analysis: Macro Week in Review/Preview January 7, 2012

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

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.

blog comments powered by Disqus
Dragonfly Caps Blog