SPY Trends and Influencers October 15, 2016

• Posted by Greg Harmon
• on October 15th, 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 noted that heading into the week the equity index ETF’s looked like they needed a breather in the short term. Elsewhere looked for Gold ($GLD) to continue lower while Crude Oil ($USO) continued to the upside. The US Dollar Index ($DXY) looked strong but range bound while US Treasuries ($TLT) were biased lower again.

The Shanghai Composite ($ASHR) was biased to drift to the downside and Emerging Markets ($EEM) looked like they would continue to consolidate in the uptrend. Volatility ($VXX) looked to remain in the lower end of the normal range keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ. Their charts all looked to continue consolidating in the short run with the QQQ looking the best for upside and the SPY next, with the IWM at risk for a pullback.

The week played out with Gold holding at the lows from the prior week while Crude Oil probed higher but met resistance and held. The US Dollar continued higher while Treasuries continued to the downside. The Shanghai Composite popped and then drifted, but to the upside while Emerging Markets fell to the bottom of the consolidation zone.

Volatility rose with a short spike and gave some back to end the week in the upper part of the normal range. The Equity Index ETF’s all started the week holding consolidation levels but then gave up support and fell through Thursday. A bounce Friday regained some of the loss but they all ended the week lower. What does this mean for the coming week? Lets look at some charts.

SPY Daily, $SPY

The SPY started the week with a small body candle moving up to the 50 day SMA. But once again it could not follow through and push higher. Tuesday saw a move lower touch the lower Bollinger Band® before a small bounce. It held there Wednesday with a tight body inside candle and opened lower Thursday. But the price action Thursday was bullish as it printed a hollow red candle, with a higher close than open, but still lower than the previous close. Friday pushed higher as well, but it gave up a lot of the intraday gain into the close.

All told it was a consolidating week. The daily chart shows the RSI is holding in the low 40’s and moving sideways while the MACD is taking a turn lower. Perhaps adding a slight downward bias. On the weekly chart the series of tighter inside candles was broken with a red wider body candle. Not what bulls wanted to see. The broader price action now has a series of lower highs and lower lows, but still in a very tight range.

The RSI on the longer timeframe is in the bullish range, and over the mid line, but falling with the MACD crossed down. There is support lower at 212.50 and 210.20 followed by 209 and 207.20. Resistance above stands at 214 and 215 followed by 215.70 and 217. Consolidation with a Short Term Bias Lower.

SPY Weekly, $SPY

Heading into October Options Expiration week the equity markets continue to show some weakness, especially in the small caps. Elsewhere look for Gold consolidate with a downward bias if it resolves soon while Crude Oil continues to plow higher. The US Dollar Index also looks to continue higher while US Treasuries continue lower. The Shanghai Composite and Emerging Markets look best to continue to bide time moving sideways.

Volatility looks to remain low but creeping higher, sucking out the tailwind from the equity index ETF’s SPY, IWM and QQQ. Their charts show clear weakness in the IWM, with the SPY and QQQ a little stronger short term. The QQQ is the best looking longer term. Use this information as you prepare for the coming week and trad’em well.

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