SPY Trends and Influencers 6/25/2011

• Posted by Greg Harmon
• on June 26th, 2011

Last week’s review of the macro market indicators looked for Gold ($GLD) to drift higher while Crude Oil ($USO) headed lower. The US Dollar Index ($UUP) was primed to continue its upside move while Treasuries ($TLT) consolidated with an upside bias. Both the Shanghai Composite ($SSEC) and Emerging Markets ($EEM) called for continued weakness. The Volatility Index ($VIX) looked to be important and poised to move higher. US Equity Index ETF’s, were mixed but generally biased to the downside. The $QQQ was the worst looking with the $SPY mixed but biased lower and the $IWM looking as it may consolidate. A move in the Volatility Index over 24 could trigger coordination among the Index ETF’s and a move lower. Consolidation in the weaker Indexes should bring the Volatility Index back under 20 and could lead to a trend change.

The week began with Gold and Oil acting as expected only to have Gold fall late in the week. The US Dollar Index and US Treasuries both behaved as the charts foretold. But while Emerging Markets continued lower, the Shanghai Composite reversed higher at the end of the week. The Volatility Index continued to drift up as Equity ETF’s moved within their bearish ranges. What does this mean for the coming week? Let’s look at some charts.

US Dollar Index Weekly, $DX_F

The US Dollar Index moved higher this week off of a higher low. It looks to be headed to test the neckline and breakdown level seen on the weekly chart near 77.10. The Relative Strength Index (RSI) on the daily chart is rising and the Moving Average Convergence Divergence (MACD) indicator is increasing. On the weekly chart The RSI and MACD also support more upside. Look for a test of the trend line higher next week at 77.10 and if through resistance higher at 78. A failure at the trendline will have Dollar bears piling in short, with first support at 76.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY looked like it was going to break it’s fall this week only to end the week near the lows, with the expanding wedge still in tact. The RSI tested the mid line and rejected lower with the MACD ready to recross negative, pointing to more downside. The weekly chart shows a second doji week, building a bear flag, but signaling indecision with the RSI flat lined but the MACD diverging, pointing to more downside. Look for the SPY to continue to consolidate next week but with a slight downside bias and a move below 126.30 leading to another leg down with support at 125 and 123.50 below that. It would take a move over 130 to become bullish.

The coming week looks to bring more red to Gold and Crude Oil, although likely at a slower pace in Crude. The US Dollar Index seems headed to a test with the 3 year trend line while US Treasuries look to continue to consolidate, but with an upward bias. The Shanghai Composite looks higher if only to retest the weekly breakdown level while Emerging Markets consolidate, with a chance of more downside. Volatility looks to continue to drift higher with a spike a possible signal of a further downside move in the Equity Index ETF’s. Otherwise they look to continue to consolidate but with the SPY and QQQ biased to the downside while the IWM is biased higher. Use this information to understand the major trend and how it may be influenced as you prepare for the coming week ahead. Trade’m well.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

Full Version with 20 Charts: Macro Week in Review/Preview June 25, 2011

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