SPY Trends and Influencers February 18, 2012

• Posted by Greg Harmon
• on February 18th, 2012

Last week’s review of the macro market indicators looked heading into the week that Gold ($GLD) was complicated consolidating in the intermediate term downtrend within the long term uptrend while Crude Oil ($USO) looked to continue to move sideways in the broad range. US Treasuries ($TLT) were poised to move lower if they broke their consolidation while the US Dollar Index ($UUP) was trying to break the downtrend higher. The Shanghai Composite ($SSEC) and Emerging Markets ($EEM) were ready for more upside. Volatility ($VIX) seemed to have bottomed and might move higher. These influencers created a mixed backdrop for the Equity Index ETF’s $SPY, $IWM and $QQQ with Treasuries supporting the uptrend and the Dollar Index threatening it. A sharp move higher by the Shanghai Composite could break the tie to the upside. The ETF’s themselves reflected the mixed mood with the SPY and QQQ looking strong while the IWM was pulling back. All three were susceptible for a pullback, just the IWM was the weakest.

The week played out with Gold giving no answers continuing to consolidate while Crude Oil drifted higher and out of the range. The US Dollar Index moved up slightly off the base and Treasuries were little changed and worked in a narrow range. The Shanghai Composite and Emerging Markets seem to have found resistance and the Volatility Index could not get up off the bottom. All of this sideways movement brought further consolidation for the QQQ and pulled the IWM back into a consolidation zone, while the SPY managed to poke over its zone and close at its highest level in over 4 years. 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.)

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY continued higher into territory not seen since 2007, after a brief pause. The series of steps higher gives a Measured Move to 137.25. The Relative Strength Index (RSI) is bullish, strong and moving sideways near 70 on the daily chart while the Moving Average Convergence Divergence (MACD) indicator continues near the zero line. A bullish bias. The weekly chart shows the continuation along the Fibonacci Fan line higher with a bullish, and rising RSI. The MACD is also positive and growing. San Frantastic! There is resistance higher at 139.40 and 142.68. Support on any pullback can be found at 134 followed by 133.17 and 130.80. Continued Upside.

Heading into next week Gold continues to be an enigma, consolidating in a intermediate term downtrend in a long term uptrend, while Crude Oil is breaking higher and looks to continue. The US Dollar Index and Treasuries are in consolidation zones but both are biased lower. The Shanghai Composite and Emerging Markets look ready to continue higher with Emerging Markets perhaps consolidating. The Volatility Index looks to remain low and perhaps test the low support. These influencers create an atmosphere for the Equity Index ETF’s, SPY, IWM and QQQ to continue higher and their charts generally agree, with the exception of the IWM that may consolidate or pullback. Use this information as you prepare for the coming week and trade’m well.

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