SPY Trends and Influencers 7/4/2011

• Posted by Greg Harmon
• on July 4th, 2011

Last week’s review of the macro market indicators looked to bring more red to Gold ($GLD) and Crude Oil ($USO), although likely at a slower pace in Crude. The US Dollar Index ($UUP) seems headed to a test with the 3 year trend line while US Treasuries ($TLT) look to continue to consolidate, but with an upward bias. The Shanghai Composite ($SSEC) looks higher if only to retest the weekly breakdown level while Emerging Markets ($EEM) consolidate, with a chance of more downside. Volatility ($VIX) 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.

The week played out at as the charts foretold for Gold, and Crude did consolidate and move slightly higher. The US Dollar Index hit resistance and bounced lower while US Treasuries broke their consolidation to the downside. The Shanghai Composite consolidated slightly higher but Emerging Markets broke their consolidation higher. The Volatility Index started higher but then drifted lower as the Equity Indexes SPY, IWM and QQQ rocketed higher over their descending wedges. The same correlations between Treasuries, Equities and the Dollar, but the opposite direction, with the US Dollar being the driver. What does this mean for the coming week? Let’s look at some charts.

US Dollar Index Weekly, $DX_F

The US Dollar Index found resistance again at 76.50 and kicked lower. The weekly chart shows a bear flag. It also shows the Relative Strength Index (RSI) rejecting off of the mid line and the Moving Average Convergence Divergence (MACD) starting to fade. The bear flag could continue to test the 77.20 trendline break without impacting the long term trend and this looks likely, unless it breaks below 74. In that case prepare for a test of 73 and the previous low at 71.50. The US Dollar continues to drive the markets.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY broke the descending wedge to the upside Friday and ran big to the high from the end of May. The RSI is rising sharply on the daily chart and the MACD increasing, boding for more upside. But the volume has been decreasing on the run higher and it is now well outside of the upper Bollinger band. The weekly chart shows the RSI turned sharply higher with the MACD moving back toward zero, but also highlighting the light volume. It is also still below the rising trend line resistance from the March 2009 lows. The strength of the bullish weekly Marubozu candle trumps all at the moment. Look for more upside in the coming week with resistance higher at 134.20 followed by 135.4 and finally 136.50 before a new leg higher can be expected. Any pullback should find support at 131.46 or 130 else the move higher comes into question.

The coming week looks for Gold to continue lower with Crude Oil biased to the upside but defined by the range between 88 and 102, I know that is big stay away from the middle. The US Dollar Index still looks headed higher to test the trend break in a bear flag, while US Treasuries continue lower. The Shanghai Composite is headed higher towards a test of the breakdown while Emerging Markets continue higher to resistance. The Volatility Index looks to remain stable allowing a run higher by the Equity Indexes toward previous highs from April. Remain cautious on any move lower that does not hold support from near Tuesday’s highs as this could trigger a major down move and a Head and Shoulders top. 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 detailed charts and analysis: Macro Week in Review/Preview July 2, 2011

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