SPY Trends and Influencers September 29, 2012

Last week’s review of the macro market indicators saw, heading into the first week of Autumn the market remained strong but with a few caution flags showing up. Gold ($GLD) looked to continue higher with Crude Oil ($USO) continuing to pullback in the uptrend. The US Dollar Index ($UUP) continued to look week despite consolidating this week while US Treasuries ($TLT) consolidated with a bias lower. The Shanghai Composite ($SSEC) looked horrible making new lows and nothing positive in the charts with Emerging Markets ($EEM) consolidating at resistance in the uptrend. Volatility ($VIX) looked to remain low paving the way for the equity index ETF’s $SPY, $IWM and $QQQ, to continue higher. This was supported by the view of a lower Dollar Index and lower Treasuries. The Index ETF’s themselves all appeared strong and held through Options Expiration, but may continue to consolidate.

The week played out with Gold and Crude Oil rolling lower only to recover Thursday and move back higher into the consolidation ranges. The US Dollar continued to drift higher in its consolidation while Treasuries may have found resistance in their run up. The Shanghai Composite made new lows before bouncing Friday and Emerging Markets moved in a tight range. Volatility drifted higher but remained subdued. The Equity Index ETF’s gave up some ground and are holding near their 20 day Simple Moving Averages (SMA). 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 fell out of its bull flag on Tuesday and spent the rest of the week holding support at the 20 day Simple Moving Average (SMA). The Relative Strength Index (RSI) also fell from a technically overbought condition back to the mid line, remaining in bullish territory for now. The Moving Average Convergence Divergence indicator (MACD) is negative and growing, giving a downward bias in the short term, but the trend is clearly higher and remains so, since the June 4th low. This is clear when looking at the weekly chart – an unfettered trend higher. But it is also showing some separation from the rising uptrend support. The RSI on this timeframe is also trending higher, but the kink lower recently is starting to get large. The MACD is positive but it is also starting to fade. Some weakness is showing. Support lower comes at 142 and 139.25 followed by 138. Under 138 is bearish and looks for 134.80 as support. Resistance higher is found at 147.40 and then the Measured Move is complete at 149.07. Short Term Pullback Within the Uptrend.

As the 4th Quarter begins look there are more signs of short term weakness in the Equity markets. Gold looks strong though and ready to move higher while Crude Oil has an upward bias but needs to confirm it. The US Dollar Index looks poised to continue the bounce in the downtrend while US Treasuries are biased higher, but consolidating. The Shanghai Composite is set up to continue its bounce in the downtrend with Emerging Markets looking to continue lower off of resistance. Volatility looks to remain subdued though making the picture for the equity index ETF’s SPY, IWM and QQQ, mixed. Low Volatility gives a tailwind, but rising US Dollar and Treasuries give Equities a downside bias. The charts of the SPY, IWM and QQQ break the tie by supporting a short term pullback within their uptrends. Use this information as you prepare for the coming week and trade’m well

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Dragonfly Capital Views Performance Through September 2012 Expiry

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