SPY Trends and Influencers March 3, 2012

• Posted by Greg Harmon
• on March 3rd, 2012

Last week’s review of the macro market indicators looked heading into the last week of February that the market looks similar to the previous week with a few changes. Gold ($GLD) looked strong and ready to continue higher as Crude Oil ($USO) might pause in its upward move. Both US Treasuries ($TLT) and the US Dollar Index ($UUP) looked better to the downside with a continued move lower by the Dollar likely. The Shanghai Composite ($SSEC) and Emerging Markets ($EEM) both looked better to the upside with the Chinese market likely to continue its move upward. The Volatility Index ($VIX) might not drop much more if at all but looked unlikely to rise soon either. These influencers created an environment for the Equity Index ETF’s $SPY, $IWM and $QQQ to continue higher and the charts of the SPY and QQQ supported the intra-market view. The IWM was biased higher, but needs to break a consolidation range before it can travel higher. A major move lower by the US Dollar or a breakdown by US Treasuries could accelerate Equities higher.

The week began with Gold holding and trying higher and Crude consolidating, acting as the charts suggested, before Gold was smacked hard midweek. The US Dollar found a bottom and started slowly higher while Treasuries continued in their tightening range. The Shanghai Composite stalled and pulled back before moving again and Emerging Markets peaked over their recent range. Volatility drifted slightly lower but held above last weeks low. With the backdrop of these moves the Equity Index ETF’s, lost speed with IWM pulling back, SPY consolidating and the QQQ stalling at the end of the week. 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 its recent pattern of a move higher to start the week and consolidation thereafter. The Relative Strength Index (RSI) on the daily chart remains strong and bullish with the Moving Average Convergence Divergence (MACD) indicator continuing to drift along the zero line, without direction. All of the Simple Moving Averages (SMA’s) except the 200 day SMA are sloping higher and under price. The Bollinger bands are tightening as it holds above 20 day SMA, foreboding a move soon. On the weekly chart the Fan line continues to play resistance with a RSI that is bullish and trending higher with a MACD that is positive, supporting more upside. There is resistance higher at 139.80 and then 143. Support on a pullback comes at 134.95 followed by 134 and 130. Trend Remains Higher.

Heading into the first full week of March the market still looks strong but is showing signs of a needed rest in some areas. Gold, the enigma, looks lower in the very short term but positive on an intermediate and long term basis while Crude Oil is consolidating in an uptrend. US Treasuries remain in their consolidation zone but are looking slightly better to the upside while the US Dollar Index appears to have found a bottom and ready to work higher as well. The Shanghai Composite and Emerging Markets both continue to look higher into next week. Volatility looks biased to the downside but has little room lower, while it certainly does not look ready to turn higher. These influencers set the stage for the US Equity Indexes to consolidate within their uptrend. A move lower by the US Dollar Index or Treasuries should change that to continue the rally higher. The charts of Equity Indexes are mixed though. The QQQ remains very strong while the SPY is starting to look ready to consolidate and the IWM may pullback. A hard move higher by the QQQ or lower by the IWM, dragging the SPY with either could set the direction for the next few weeks. Use this information as you prepare for the coming week and trade’m well.

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