SPY Trends and Influencers February 11, 2012

• Posted by Greg Harmon
• on February 11th, 2012

Last week’s review of the macro market indicators looked heading into the week that Gold ($GLD) was ready for at least a short pullback while Crude Oil ($USO) continued lower in it range. The US Dollar Index ($UUP) and US Treasuries ($TLT) seemed content to move sideways while each was now biased lower. The Shanghai Composite ($SSEC) and Emerging Markets ($EEM) were both better to the upside in the short run with Emerging Market looking higher long term as well while China remained in the downtrend. Volatility ($VIX) looked to continue lower although it might stop falling soon as it nears 4 year support levels. These influencers combined to create an environment for the Equity Index ETF’s $SPY, $IWM and $QQQ, to continue higher. Their weekly charts agreed but their daily charts all were starting to show signs they may be short term extended.

Gold bounced around in a narrow range while Crude Oil drifted back to a test at 100. The US Dollar and Treasuries continued a slow drift lower until a bounce Friday. The Shanghai Composite and Emerging Markets did continue higher, with Emerging Markets giving it back Friday, while Volatility appears to have found bottom. The Equity Index ETF’s continued their drift higher with a bit of a pullback Friday, most markedly in the IWM which gapped lower creating an island. 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 held the gap higher from last Friday and built on it until a pullback on Friday. The uptrend looks strong. The Relative Strength Index (RSI) on the daily chart has pulled back from a technically overbought situation and is pointing lower while the Moving Average Convergence Divergence (MACD) indicator remains very flat and near the zero line. Net positives. The Hanging Man from Thursday was confirmed lower Friday though so we could be in for more downside in the short run. The weekly chart shows a narrow range holding near resistance of the April 2011 high and the Fibonacci Fan line. The RSI on this timeframe is trending higher and bullish though and the MACD is slowly and steadily growing more positive. There is resistance higher at 139.40 but that is from 2007. Support lower is found at 134 followed by 130 and 128.60. Under that you can start to talk bearish. Uptrend Continues with Chance of Pullback or Consolidation.

Heading into next week Gold looks complicated consolidating in the intermediate term downtrend in the long term uptrend while Crude Oil looks to continue to move sideways in the broad range. US Treasuries are poised to move lower if they break their consolidation while the US Dollar Index is trying to break the downtrend higher. The Shanghai Composite and Emerging Markets are ready for more upside. Volatility seems to have bottomed and may move higher. These influencers create a mixed backdrop for the Equity Index ETF’s SPY, IWM and QQQ with Treasuries supporting the uptrend and the Dollar Index threatening it. A sharp move higher by the Shanghai Composite could break the tie to the upside. The ETF’s themselves reflect the mixed mood with the SPY and QQQ looking strong while the IWM is pulling back. All three are susceptible for a pullback, just the IWM is the weakest. Use this information as you prepare for the coming week and trade’m well.

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