SPY Trends and Influencers November 18, 2017
- Posted by Greg Harmon
- on November 18th, 2017
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 heading into November Options Expiration that Equity markets had weathered a minor tremor but were still fazed. Elsewhere looked for Gold ($GLD) to pause in its downtrend while Crude Oil ($USO) slowed in its uptrend. The US Dollar Index ($DXY) was looking better to the upside after some consolidation while US Treasuries ($TLT) were biased lower.
The Shanghai Composite ($ASHR) had gained strength and was rising again while Emerging Markets ($EEM) continued to churn following their break of long term resistance. Volatility ($VXX) looked to remain at low levels keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ. Their charts showed strength on the longer timeframe intact, with the SPY and QQQ the strongest and the IWM retesting the breakout. On the shorter timeframe the IWM was most vulnerable as it continued in a long bull flag, while the SPY and QQQ appeared to have held off deeper pullbacks for now.
The week played out with Gold marking time sideways in a narrow range until rising at the end of the week while Crude Oil met supply and sold back to support. The US Dollar fell back below support though while Treasuries moved higher but not not muster a higher high. The Shanghai Composite made a higher high but could not hold there while Emerging Markets found support and then pushed higher.
Volatility came to life early in the week pressing into the low teens but was falling back to end the week and keep the bias higher for equities. The Equity Index ETF’s had mixed but positive results on the week, with the SPY drifting in a tight range ending higher while the QQQ digested early in the week before rising and the IWM show good strength late in the week, breaking its downturn. What does this mean for the coming week? Lets look at some charts
The SPY came into the week following a minor pullback from a new all-time high close. Monday it printed a bullish engulfing candle, suggesting a resumption higher. But that did not materialize Tuesday. Instead it made a Harami, an inside day, but held over the 20 day SMA. Wednesday moved under the 20 day SMA though with a possible Morning Star pattern forming. It was confirmed Thursday with a strong move higher, back over the 20 day SMA.
It ended the week with another Harami, lower for the week, but not by much. The daily chart shows consolidation at the top. The RSI is in the bullish range but making a lower high. The MACD is slowing its fall but positive. The Bollinger Bands® are running sideways. Basically consolidation on this short timeframe.
The weekly chart shows a second small body candle at the highs. The RSI is overbought but not extreme and resetting lower, while the MACD is turning toward a cross down. There is support lower at 257 and 256 followed by 254.50 and 252.50 before 250. The only resistance higher is at 259.25. Consolidation in the Uptrend.
With November options expiration behind the markets drive into the shortened Thanksgiving week with a changing of the guard to the small caps. Elsewhere look for Gold to continue in its uptrend while Crude Oil works through short term resistance. The US Dollar Index pauses in its short term uptrend while US Treasuries consolidate. The Shanghai Composite is taking a breather in its uptrend and Emerging Markets are consolidating their move higher.
Volatility looks to remain very low keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. On the shorter timeframe the IWM is now taking the lead as the SPY and QQQ consolidate. In the longer frame they still need to prove themselves a leader as the QQQ and SPY mark time. Use this information as you prepare for the coming week and trad’em well.
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Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)