December SPY Trends And Influencers: Markets Biased Cautiously Higher

Last week’s review of the macro market indicators suggested, heading into December that the markets were biased higher but cautiously so. Gold (GLD) looked headed lower in its long term channel while Crude Oil (USO) headed higher. The US Dollar Index (UUP) seemed content to move lower while US Treasurys (TLT) were biased lower but might continue to consolidate.

The Shanghai Composite (SSEC) was marching lower while Emerging Markets (EEM) stagnated in their consolidation zone. Volatility (VIX) looked to remain low keeping the bias higher for the equity index ETF’s SPY, IWM, and QQQ. Their charts were starting to show signs of being tired, though, so caution was warranted on the long side in the near-term.

The week played out with Gold moving lower while Crude Oil continued in the tight range. The US dollar ended its move lower bouncing to end the week while Treasurys consolidated. The Shanghai Composite found a short-term bottom and rallied while Emerging Markets gave up their range moving higher. Volatility continued to act subdued. The Equity Index ETF’s ran sideways with the SPY and IWM flat and the QQQ drifting slightly lower. What does this mean for the coming week? Let's look at some charts.

SPY Daily (SPY)

SPY Weekly (SPY)

The SPY had a very interesting week technically. Starting with a bearish engulfing candle that was confirmed lower, followed by a Hammer reversal candle that was confirmed higher, and ending with a Hanging Man, awaiting Monday to see if it confirms lower or not. Viewing it more broadly, the week was a consolidation in the recent uptrend, a bull flag.

The Relative Strength Index (RSI) on the daily chart is rising and on the verge of moving into bullish territory with a Moving Average Convergence Divergence indicator (MACD) that is positive and stalled. These support more upside. The weekly view shows the return to the rising trend support/resistance line with a tight body candle. The RSI on this timeframe held in bullish territory and is rising with a MACD that is negative but improving.

There is resistance higher at 144.44 and 147 with a Measured Move higher to 156.22 above that. Support lower is found at 139.80 and 138.60 followed by 134.70. Under that the bias turns bearish. Uptrend with a Chance of Consolidation.

Heading into next week the markets are slowing but positive. Gold looks to consolidate the latest move lower while Crude Oil joins it to the downside. The US Dollar Index is bouncing higher while US Treasurys are set up to move lower or consolidate. The Shanghai Composite and Emerging Markets are biased to the upside with the Chinese market doing so in a downtrend while Emerging Markets are gaining strength.

Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. The SPY and IWM seem strong while the QQQ is the weakest of the 3 and should be the one to watch on a rollover. Use this information as you prepare for the coming week and trade’m 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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