SPY Trends and Influencers August 14, 2011

• Posted by Greg Harmon
• on August 14th, 2011

Last week’s review of the macro market indicators looked interesting on many levels. Gold ($GLD) appeared ready to consolidate, if only for a couple days within the uptrend while Oil ($USO) could consolidate before continuing the fall. The US Dollar Index ($UUP) looked to drift higher in the 20.88 to 21.90 range while US Treasuries ($TLT) pullback. The Shanghai Composite ($SSEC) appeared headed lower toward support and Emerging Markets ($EEM) might consolidate or bounce a bit before doing the same. The spike in Volatility ($VIX) looked to have more room to the upside but showed signs of pulling back at least early in the week. The Equity Index ETF’s $SPY, $IWM and $QQQ appeared set to bounce early next week, but the SPY and IWM charts look broken on many timeframes and headed lower. The QQQ was a bit of an enigma as it had maintained a hold at support. The QQQ’s continuing to hold and move higher would be a signal that the broad downturn may be ending. On the other hand if the SPY and IWM continue lower as expected in the intermediate term the QQQ will likely join them lower.

The week began with a bang as S&P downgraded the US debt late last Friday, removing the expected consolidation. On Monday Gold moved higher quickly and Crude Oil fell. Treasuries ran higher with the added catalyst of European fears and the US Dollar Index held steady but printing wide range doji days. The Shanghai Composite fell and Emerging Markets followed. Volatility spiked and the equity indexes SPY, IWM and QQQ pushed lower fast. By Wednesday morning a lower support area was forming for equities and Oil with higher resistance for Treasuries and Gold. Thursday began the reversal for all which then continued Friday in a narrow range. What does this all mean for the coming week? Let’s look at some charts.

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

VIX Weekly, $VIX

The Volatility Index spiked to the 48 level where it stopped in May 2010 before pulling back as the week progressed. It did find support though at the 34 level that has been important in the past. With the RSI moving lower and the MACD declining this time-frame suggest that volatility will fall in the short term. The weekly chart printed a shooting star with the RSI rising but reaching the overbought level where it has sold off 4 of the last 5 times. The MACD is still rising on this time-frame. With the weekly chart also out of the Bollinger bands look for Volatility for the week to continue lower. If it does not break 34 then all bets are off and the markets are in big trouble.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY broke lower Monday and then bounced in a range for the week finishing Friday with a doji candle just above that range but under last Friday’s close. The RSI on the daily chart bottomed and is rising sharply while the MACD also has been improving off of the low from Wednesday. The weekly chart shows a hollow red Hammer candle at support with the RSI and MACD still pointing lower. It is well outside of the Bollinger band on this time-frame and printed volume not seen since the March 2009 lows. Look for next week to be biased higher with resistance at 119.20 and 121.50 above that, but the trend remains lower. It would take a move above 126.50 to negate the trend. A move lower would find some support at 116 and 113 followed by 111.15.

Next week looks like a reversal of this week. Gold looks heading lower while Crude Oil has a short term bias higher in a downtrend. The US Dollar Index looks to continue sideways in the 20.88-21.90 range, while US Treasuries look to continue lower in an uptrend. The Shanghai Composite and Emerging Markets look to be headed higher. Volatility looks biased to the downside with a move under 34 key to continuing lower, and giving a bias to the upside for the Equity Indexes SPY, IWM and QQQ, also within a downtrend. the big question looks to be whether this is a dead cat bounce or for real. Use this information as you prepare for the coming week and trade’m well.

Full Version with 20 detailed charts and analysis: Macro Week in Review/Preview August 13, 2011

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