SPY Trends and Influencers October 27, 2012

• Posted by Greg Harmon
• on October 27th, 2012

Last week’s review of the macro market indicators suggested, heading into the new options cycle Gold ($GLD) and Crude Oil ($USO) looked ready to pullback further with the possibility that Crude Oil continued to consolidate. The US Dollar Index ($UUP) was poised to continue to move sideways while US Treasuries ($TLT) were biased lower. The Shanghai Composite ($SSEC) was biased to the upside within the long term downtrend while Emerging Markets ($EEM) looked to continue to consolidate. Volatility ($VIX) looked to remain low but was hinting at a move higher now, leaving the intermarket bias for the equity index ETF’s $SPY, $IWM and $QQQ, mixed. Longer term biases lower for the US Dollar and Treasuries supported the upside while potentially rising Volatilty supported more pullback. The Indexes themselves reflected this with the SPY the strongest and still consolidating while the IWM was biased lower and the QQQ the pulling back. All three were biased to the downside in the short run but the IWM and QQQ were at longer term rising trendline support.

The week played out with Gold falling to support while Crude Oil also moved lower but is showing bottoming signs. The US Dollar continued sideways but towards the top of the range while Treasuries moved in a narrow range. The Shanghai Composite finally gave up the bounce and turned lower while Emerging Markets stayed in their range, testing the bottom end. Volatility bounced up off of the lows but remained subdued. The Equity Index ETF’s all fell Monday but consolidated for the rest of the week. 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 fell lower on Monday and then consolidated in a series of small range candles culminating in a doji to end the week. The Relative Strength Index (RSI) has turned into bearish territory with a Moving Average Convergence Divergence indicator (MACD) that is negative on the daily chart. Both support continued downside movement. The 100 day Simple Moving Average (SMA) is not far away now and with support underneath at 138.60 and 137. On the weekly chart the pullback continues with a touch at the 20 week SMA and the long term rising trendline nearby. The RSI on this view is trending lower with a MACD that has just crossed to negative, supporting more downside. Support under 137 shows at 133 and then 125.81. Under that switches the bias to downward. Resistance is found above at 142 and 144.44 followed by 147.70. Continued Downside with a Chance of Consolidation.

Heading into next week the markets continue to look vulnerable. Gold is still biased lower in the channel but maybe finding a bottom while Crude Oil looks better lower. The US Dollar Index and Treasuries seem content to move sideways with longer term bias lower. The Shanghai Composite is done with its bounce while Emerging Markets continue to consolidate. Volatility looks to remain low but is showing signs of life. These create a mixed environment for the Equity Index ETF’s SPY, IWM and QQQ, with the Dollar and Treasuries supporting Equities while Volatility and Crude Oil point lower. The charts of the Indexes themselves all are biased to the downside. Use this information as you prepare for the coming week and trade’m well.

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Dragonfly Capital Views Performance Through October 2012 Expiry

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