SPY Trends and Influencers December 13, 2014

• Posted by Greg Harmon
• on December 13th, 2014

A weekly excerpt from the Macro Review analysis sent to subscribers on 10 markets and two timeframes.

Last week’s review of the macro market indicators suggested, heading into the week that equities broadly looked better higher but signs of rotation were showing up. Elsewhere looked for Gold ($GLD) to continue the short term channel higher in the downtrend while Crude Oil ($USO) might be finding a bottom at last. The US Dollar Index ($UUP) continued to be strong as US Treasuries ($TLT) were biased lower in the uptrend.

The Shanghai Composite ($PEK) looked to continue its uptrend, but perhaps with a short term pause while Emerging Markets ($EEM) were consolidating in a bear flag and biased to the downside. Volatility ($VXX) looked to remain subdued keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ. The SPY looked good on the longer timeframe with the IWM starting to move out of a tight range higher. The QQQ looked a bit tired in the short run and money might rotate out of it to the IWM.

Well that did not work out so well for equities. The week played out with Gold continuing higher while there was no bottom in Crude Oil as it continued lower. The US Dollar pulled back to support while Treasuries moved back near the October high.

The Shanghai Composite finally spent some time consolidating while Emerging Markets broke the bear flag to the downside. Volatility crept up closing near critical levels. The Equity Index ETF’s halted started the week to the downside and just kept slipping, with the SPY ending at the 50 day SMA and, the QQQ at the lower Bollinger Band®, and the IWM the strongest but still at the low of the week.

What does this mean for the coming week? Lets look at some charts.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY started the week pulling back from a new all-time high the prior Friday, and only to rising trend support. The gap down Tuesday was bought and the gap closed showing strength in a Hollow Red candle that suggested maybe a 1 day event. That mood was erased Wednesday when it moved strongly lower and could not bounce Thursday. Falling Friday, it ended the week at the low.

It is out of the Bollinger Bands on the daily chart so a bounce or reversal would not be unexpected, but the RSI is continuing lower and has moved into the bearish zone, with a MACD falling. These support more downside, and with the 50, 100 and 200 day SMA’s so close, touching one or more is gaining probability. The weekly chart shows a near Marubozu candle lower, foretelling more downside. The RSI is falling, but remains in the bullish zone, while the MACD is just kinking lower. Volume on this sell off has been increasing as well.

There is support lower at 200 and 198.60 followed by 196.70 and 195 before 194.20 and 191.80. Resistance may come at 201.90 and 203.25 followed by 204.35 and 205.70. Continued Downward Price Action in the Broad Uptrend.

Heading into the last full week of the year equity markets are seeing weakness. Elsewhere look for Gold to continue its short term uptrend while Crude Oil continues the trend lower, but with perhaps a short term bounce. The US Dollar Index looks to move sideways in the uptrend while US Treasuries are biased higher.

The Shanghai Composite is finally consolidating its strong move in the uptrend while Emerging Markets look to continue their fall lower. Volatility looks to remain slightly elevated in the low zone keeping the short term bias lower for the equity index ETF’s SPY, IWM and QQQ. The SPY and QQQ look weakest and have room to pullback more while the IWM is consolidating but at the bottom of the range, so also vulnerable. Use this information as you prepare for the coming week and trad’em well.

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