SPY Trends and Influencers February 4, 2012

Last week’s review of the macro market indicators looked as January was closing out, to bring more upside for Gold ($GLD) and further consolidation within the broad 93 – 103.83 range for Crude Oil ($USO). The US Dollar Index ($UUP) looked to continue lower while US Treasuries ($TLT) consolidated after probing lower. The Shanghai Composite ($SSEC) and Emerging Markets ($EEM) were biased to the upside after China taking the week off. Volatility ($VIX) looked to continue to slowly move lower toward support. These influencers created a positive environment for the US equity index ETF’s $SPY, $IWM and $QQQ, and their charts were all pointing to higher levels. A caution was given that a strong move by China lower could change this picture or a sharp move higher by the US Dollar Index.

The week began with Gold rising and Oil heading toward the lower end of the range with both reversing some of the move on Friday. The US Dollar its recent move lower consolidated but Treasuries popped and held all week before gapping back lower to end the week. The Shanghai Composite came back from the holidays drifted under resistance while and Emerging Markets continued their run higher. Volatility fell slightly with a marked drop Friday testing near support. The Equity Index ETF’s started the week moving higher and then put an exclamation point on it gapping higher and holding Friday. What does this mean for the coming week? Lets 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 completed a small pullback to the 50 day SMA and then launched higher. It ended the week with a small body candle gapping higher near the April high, a potential Evening Star reversal on a move lower Monday. The trend is clearly higher though. The Relative Strength Index (RSI) also points to caution as it is technically overbought, but not a sell signal. The Moving Average Convergence Divergence (MACD) indicator on the daily chart looks to be heading back higher. The weekly chart shows a strong move higher after breaking through the Fibonacci Arc, ending near the next Fibonacci Fan Line. The RSI on this timeframe is trending higher and bullish as is the MACD. There is resistance higher at 134.95 and then 136.69 and 139.42. Support on a pullback may be found at 131.77 and 130 before 128.60 and a trend reversal under 120. Continued Upside

Heading into next week Gold appears ready for at least a short pullback while Crude Oil continues lower in it range. The US Dollar Index and US Treasuries seems content to move sideways while each is now biased lower. The Shanghai Composite and Emerging Markets are both better to the upside in the short run with Emerging Market looking higher long term as well while China remains in the downtrend. Volatility looks to continue lower although it may stop falling soon as it nears 4 year support levels. These influencers combine to create an environment for the Equity Index ETF’s SPY, IWM and QQQ, to continue higher. Their weekly charts agree but their daily charts all are starting to show signed they may be short term extended. Use this information as you prepare for the coming week and trade’m well.

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