SPY Trends and Influencers January 16, 2016

• Posted by Greg Harmon
• on January 16th, 2016

A weekly excerpt from the Macro Review analysis sent to subscribers on 10 markets and two timeframes.

Last week’s review of the macro market indicators saw the worst first week of the New Year ever. Heading into January options expiration there really did not look to be any relief in sight for the equity markets. Elsewhere looked for Gold ($GLD) to continue the bounce higher in its downtrend while Crude Oil ($USO) burned lower. The US Dollar Index ($UUP) looked to continue consolidation at its highs while US Treasuries ($TLT) were biased higher in consolidation. The Shanghai Composite ($ASHR) and Emerging Markets ($EEM) were biased to the downside and looking really ugly.

Volatility ($VXX) looked to remain elevated keeping the bias lower for the equity index ETF’s $SPY, $IWM and $QQQ. Their charts also pointed lower with perhaps a pause or oversold bounce in the short run, but with their intermediate term charts moving decidedly more bearish. The one possible exception was the QQQ which remained somewhat above the August lows.

The week played out with Gold finding resistance and drifting slightly lower while Crude Oil dove lower. The US Dollar maintained near its highs while Treasuries broke consolidation to the upside. The Shanghai Composite continued the 2016 steady march lower while Emerging Markets consolidated at the low. Volatility continued to be mildly elevated until it popped Friday.

The Equity Index ETF’s all responded by heading lower on the week, after a failed attempt at consolidation early on. The IWM is more than 20% off its high and under the August lows, with the SPY approaching the August low and down over 12% and the QQQ down 15% but still holding above the August and September lows. What does this mean for the coming week? Lets look at some charts.

SPY Daily, $SPY

The SPY followed up its worst week to start a year with another poor showing losing another 2.14%. The week started off well with a Hammer confirmed higher Tuesday but Wednesday followed with a very strong down day. Thursday’s inside day brought more hope for a reversal but Friday then gapped lower reaching the September low.

Once again the Hollow Red candle shows good intraday action to the upside on volume not seen since the August meltdown giving hope again for a reversal. The RSI on the daily chart is deep in bearish territory though and running along the oversold level without diving into it. The MACD continues to drive lower.

On the weekly chart the red candle pressed open the Bollinger Bands® as price fell. The RSI on this timeframe is bearish and falling while the MACD is falling as well. There is support lower at 187 and 184.40 followed by 181.35 and 177.85. Resistance above comes at 188 and 189.5 followed by 191.5 and 194.5. Continued Downtrend.

SPY Weekly, $SPY

With the closing of the January options expiration and the worst two week start to a year ever, equity markets do not look like they are done falling yet. Elsewhere Gold is biased higher in its downtrend while Crude Oil consolidates in its downtrend. The US Dollar Index continues to move sideways but with an upward bias while US Treasuries are biased higher.

The Shanghai Composite and Emerging Markets are biased to the downside with the Chinese market possibly ready to consolidate. Volatility looks to remain elevated and with an upward bias keeping the bias lower for the equity index ETF’s SPY, IWM and QQQ. Their charts agree and look better to the downside on both the daily and weekly timeframes.

The IWM crossed into a bear market and looks the worst. The QQQ is down over 15% but still holding best over the August and September lows, while the SPY has held the closest to its all time high but is precariously perched heading into the week. Use this information as you prepare for the coming week and trad’em well.

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