As Equity Markets Show Strength, Look For Gold To Pullback

SPX Monthly Chart

Last week’s review of the macro market indicators saw, with the first week of September in the books equity markets were seeing a resurgence. Elsewhere looked for Gold ($GLD) to pause in its uptrend while Crude Oil ($USO) slowly drifted lower. The US Dollar Index ($DXY) was also drifting, but to the upside while US Treasuries ($TLT) pulled back in their uptrend.

The Shanghai Composite ($ASHR) and Emerging Markets ($EEM) had both reversed to the upside and looked to continue higher. Volatility ($VXXB) had eased and looked to remain very low changing the bias to higher for the equity index ETF’s $SPY, $IWM and $QQQ. The SPY and QQQ both broke ranges to issue buy signals while the IWM continued to churn in a wide consolidation.

The week played out with Gold pulling back to the big round number 1500 and then through it Friday while Crude Oil started higher but give up the move and ended lower on the week. The US Dollar tried to move higher mid week but could not hold it and fell back while Treasuries continued to move lower. The Shanghai Composite stalled after clearing resistance while Emerging Markets continued the move to the upside.

Volatility dropped to 6-week lows easing the path for equities and putting wind at their back. The Equity Index ETF’s started the week flat but then the IWM made a move to the upside that continued until Friday. The SPY and QQQ joined on Wednesday with a 2 day run up before a stall Friday in the SPY and pullback for the QQQ. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

SPY Daily Chart

The SPY had moved higher out of a month-long consolidation as it entered the week. It started higher Monday but could not hold and ended up only slightly. A similar move Tuesday but with a lower open showed possible topping. But Wednesday raced higher and it was followed by another move up Thursday. This made a new intraday high.

It held there Friday, closing less than 1 point from the all-time high close. The Bollinger Bands® are open higher as it sits there this time though. The RSI is rising and has room to move higher without being overbought with the MACD rising and positive. A Measured Move would target 311.50 on this leg.

The weekly chart also looks strong. The price is moving higher with the RSI rising in the bullish zone and the MACD about to cross up and positive. There is room above before reaching the upper Bollinger Band as well. There is no resistance above 302. Support lower sits at 301 and 300 then 298.80 and 296.50 before 294.50. Uptrend.

SPY Weekly, $SPY

SPY Weekly Chart

Heading into September Options Expiration and the FOMC meeting the equity markets are showing strength, but building that wall of worry as they sit at prior highs, not breaking through them. Elsewhere look for Gold to pullback in its uptrend while Crude Oil consolidates in the drift lower. The US Dollar Index also continues to drift to the upside while US Treasuries continue lower. The Shanghai Composite is pausing in its new move higher while Emerging Markets look to continue higher.

Volatility continues to remain very low keeping the bias to the upside for the equity index ETF’s SPY, IWM and QQQ. The SPY and QQQ both sit on the cusp of new all-time highs after touching their tops but recoiling. The IWM also shows promise at the top of its long consolidation range. Use this information as you prepare for the coming week and trad’em well.

Disclaimer: 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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