SPY Trends and Influencers June 3, 2012

Last week’s review of the macro market indicators saw heading into the last week before the unofficial start of Summer the reality of a continued bearish bias as strong. Crude Oil ($USO) looked better to the downside with Gold ($GLD) heading higher at the same time as global economic fears were growing. The US Dollar Index ($UUP) and Treasuries ($TLT) were looking to continue to strengthen with a chance that the Dollar Index consolidated first. The Shanghai Composite ($SSEC) was now firmly heading lower in line with the crash in the Emerging Markets ($EEM). The Volatility Index ($VIX) broke the pressure cooker to the upside and looked to continue to move higher. These influencers set a backdrop for the Equity Index ETF’s to continue to the downside. There was no disagreement or discussion this week. The charts of the $SPY, $IWM and $QQQ whole-heartedly agreed with the downside bias. The only caution with global turmoil was to look for a reversal in the Dollar Index or Treasuries as a sign that the worst was over for equities.

The week played out with Crude Oil continuing the move lower. Both the US Dollar Index and US treasuries resumed their march higher. The Shanghai Composite found some footing and held a tight range while Emerging Markets also consolidated at the lows. The Volatility Index was steady early in the week before rising as it progressed. Gold along with the SPY, IWM and QQQ lead very uneventful weeks, holding steady over support, until Friday that is, when the bottom dropped out for Equities and Gold did a moon shot 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 broke the bear flag lower with a strong move lower to the 200 day Simple Moving Average (SMA) on increasing volume. The Measured Move lower would take it to 124. The Relative Strength Index (RSI) on the daily chart is bearish and verging on technically oversold with a Moving Average Convergence Divergence (MACD) indicator that averted a positive cross and is heading lower again. The Bollinger bands are opening lower as well. On the weekly chart the price broke the rising trend support ending on the low of the week. The RSI continues to run lower with the MACD growing more negative. There is nothing good here. Support lower is found at 128 and 125.80 followed by 124.33. Under 124 opens up 120.80 and 112.30. Resistance on a bounce comes at 129.60 followed by 131.46 and 134. A move over 134 would change the bias to bullish. More Downside.

Heading into June the broad market looks weak. Gold looks better to the upside in the short run within the downtrend while Crude Oil looks to continue lower. The US Dollar Index and US Treasuries look strong to the upside with a chance of consolidation. The Shanghai Composite and Emerging Markets are set up to consolidate within a downward bias. Volatility looks to continue higher for the equity as well. These influencers create an environment where the index ETF’s SPY, IWM and QQQ, are set up to move lower and the charts agree. Consolidation by the US Dollar Index and Treasuries may forestall further declines in Equities. The QQQ looks the strongest of the Equity Indexes. 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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