SPY Trends and Influencers: Monthly Edition

Last month’sMonthly Macro Review/Preview suggested the monthly outlook over the next few months was for Gold ($GLD) and Copper ($JJC) looking to head lower with a chance that Copper consolidates sideways. The divergence between Crude Oil ($USO) and Natural Gas ($UNG), with Oil heading higher and Gas lower, looked to continue although Crude may consolidate or head slightly lower in the short term. Both the US Dollar Index ($UUP) and Treasuries ($TLT) looked to continue higher with Treasuries possibly continuing the consolidation first. In the foreign markets tracked, the Shanghai Composite ($SSEC), German DAX ($DAX) and Emerging Markets ($EEM), all were better lower with a chance that China and Germany consolidate before another move. Volatility ($VIX) looked to continue to drift down. These influencers painted a mosaic that give the US Equity Index ETF’s a slight bias to the downside, although a clouded one with Treasuries and the US Dollar conflicting with Oil and the Volatility Index. The $SPY however was disagreeing, with a better look higher while the $IWM agreed with a best look lower. The $QQQ was firmly in the middle. A possible scenario then was that all move sideways for a while until the conflicts resolve. There were a few surprises and reversal signals though. How does the additional month impact the longer term picture? Let’s take a look.

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SPY, $SPY

Looking at the SPY from a Fibonacci perspective, it continued to ride the Fan Line higher towards a test of the May high. A continued move along this line higher would have a retest of the 2007 high by June at 143.64. The Relative Strength index (RSI) is trending higher again, without having moved negative and the Moving Average Convergence Divergence (MACD) indicator is flat but ready to cross positive. Both support further upside. A pullback to the May 2010 high could still remain bullish but a move below the October 2011 lows without a new higher high would turn the trend bearish. Look for more upside in the coming months.

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The monthly outlook suggests the change to an uptrend for Gold and Copper will confirm. The divergence of Crude Oil consolidating in a bullish bias with Natural Gas continuing lower will to continue. US Treasuries and the US Dollar Index both suggest continued strength. The Shanghai Composite remains trending lower while Emerging Markets have moved to a Neutral to slightly bullish bias and the German DAX reverses higher. Volatility looks to continue to move lower as it approaches support. Despite the upward bias to Treasuries and the US Dollar the Equity Index ETF’s SPY, IWM and QQQ are all now aligned and set up to continue higher in the coming months. Use this information to understand the long term trends in Equities and their influencers as you prepare for the coming months.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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