SPY Trends and Influencers July 21, 2012

• Posted by Greg Harmon
• on July 21st, 2012

Last week’s review of the macro market indicators saw heading into the new week there was a bit of a positive tone but with a diverging inter-market macro view. Gold ($GLD) and Crude Oil ($USO) looked to continue their trends lower but with consolidation or a short term rise. The US Dollar Index ($UUP) and Treasuries ($TLT) both looked to continue higher. The Shanghai Composite ($SSEC) looked to continue lower while Emerging Markets ($EEM) followed Equities drifting higher. The Volatility Index ($VIX) looked to remain subdued and may even move lower. This created the mixed view with Treasuries and the Dollar supporting downside for Equities while Volatility allowed for a further rise. The charts of the Equity Index ETF’s, $SPY, $IWM and $QQQ, all looked better to the upside in the short term within broad consolidation or bear flags.

The week played out with Gold continuing to consolidate while Crude Oil moved back higher out of the base. The US Dollar fell back to support at the bottom of the recent consolidation while Treasuries pulled a ‘V’ move stating higher and eventually finishing there. The Shanghai Composite consolidated in the range near the recent lows while Emerging Markets moved slightly higher. Volatility did move lower before bouncing a bit Friday. The Equity Index ETF’s took their queue from the falling Volatility Index and US Dollar and moved higher before fading to end the week. 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 moved back higher from a higher low and made a higher high before pulling back Friday, confirming a doji star lower. The RSI remains in bullish territory on the daily chart but is turning lower with a MACD that is positive but stalling. A mixed bag on the daily front, but the trend remains higher. Caution that is could be a bear flag. The weekly view shows a series of three topping candles, two with topping tails with a Hanging Man in between. The RSI on this timeframe remains bearish but trending higher and near a turn to bullish, with the MACD trending towards a bullish cross to positive, but in a shallow angle which may kiss and go lower. There is resistance higher at 137.90 and a move over that is free to test 140 and 141.48. Over that it gets very bullish. Support lower is found at 136 and 133 followed by 131.46 and a move lower at 128. Below 128 all is very bearish. With the SMA running sideways there may be no clear resolution for a while. Bias Higher Intermediate in Channel with Risk Lower Confirming Bear Flag.

Heading into the next week Gold looks to continue to consolidate in the downtrend with Crude Oil looking higher with a chance of consolidation. The US Dollar Index is poised to continue higher with US Treasuries leading them up. The Shanghai Composite and Emerging Markets look biased to continue lower with Emerging Markets potentially consolidating. The Volatility Index points to continued lower fear allowing for the Equity Indexes, SPY, IWM and QQQ to move higher. The US Dollar and Treasuries suggest that this will not happen though. This correlation between Treasuries, the Dollar and Equities has been broken for a while but will likely reestablish with a divergence soon. The charts of the Equity Indexes show that they remain biased higher in what may be bear flags. Also presenting a cautious view. Use this information as you prepare for the coming week and trade’m well.

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