SPY Trends and Influencers August 28, 2011

• Posted by Greg Harmon
• on August 28th, 2011

Last week’s review of the macro market indicators looked like the entire rubber band of the market was getting a little stretched but expected it to continue. Gold ($GLD) looked to continue higher as Crude Oil ($USO) continued to sell off. The US Dollar Index ($UUP) appeared comfortable continuing sideways while US Treasuries ($TLT) moved higher. The Shanghai Composite ($SSEC) and Emerging Markets ($EEM) look ready for more downside. Volatility ($VIX) looks biased higher leading to the expectation that Equity Index ETF’s $SPY, $IWM and $QQQ continue lower. Remember that a stretched rubber band can result in two outcomes: a snap back, or the rubber band breaks and the real carnage results. Stay nimble.

The week began with Gold rising but peaking Tuesday while Crude Oil did continue higher. The US Dollar Index continued in its channel but Treasuries fell before coming back late in the week. The Shanghai Composite Index and Emerging Markets moved in a range sideways. Volatility held higher but equities managed to hold and move higher by Friday. How does this impact the view for the week ahead? Let’s look at some charts.

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

Gold Weekly, $GC_F

Gold, the commodity, started the week higher then fell over $200 in a few days before rebounding Friday. The daily chart shows that the fall found support at the 20 day Simple Moving Average (SMA) and previous support area at 1748. It also worked off the overbought condition on the Relative Strength Index (RSI). The bad news on this timeframe is that the Moving Average Convergence Divergence (MACD) indicator has crossed negative, now diverging with price and the RSI. On the weekly timeframe Gold retested the channel breakout before moving back higher. The RSI on this timeframe is still elevated but moving lower and the MACD is solidly up, but it settled out of the Bollinger bands for the fourth straight week. Gold looks ready to consolidate in what is likely to be a broad range moving into next week. Look for the bulk of the action to be between 1748 and 1800 with moves up to 1825 and down to 1700 possible, but a less defined uptrend, for now. The longer term trend is still strongly higher.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY bounced off of the lows from last week tagging the falling 20 day SMA. The RSI is pointing higher on the daily time frame and the MACD has crossed higher supporting more upside. The weekly time frame shows a bear flag sitting on the fall back to the 61.8% Fibonacci level from the move lower from 2008 to 2009. The MACD is negative and growing while the RSI has bounced off of the technically oversold line at 30. The trend remains lower despite the up move. It would take a move above 121.50 to reverse the current trend. Until then look for more downside or at least consolidation below the 121.50 level and a move below 111.15 a catalyst for more downside and support lower at 102.5-104.50.

As the last week of unofficial Summer begins look for Gold to bounce around in its uptrend while Crude Oil slows at resistance and turns lower. The US Dollar Index seems content to move sideways while US Treasuries are biased lower. The Shanghai Composite and Emerging Markets are biased to the downside with risk of the Chinese market running a little higher first. Volatility looks to remain elevated keeping the bias lower for the equity index ETF’s SPY, IWM and QQQ, despite the recent rise, with the QQQ looking to have the best chance to break the bear flags higher. 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 27, 2011

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