Last week’s review of the macro market indicators noted that while heading into the December Options Expiration and the last full trading week of the year, equity markets continued to look weak, and look to be getting weaker. Gold looked to pause in its uptrend, while Crude Oil consolidated in its downtrend. The U.S. Dollar Index looked to pause in its uptrend, while U.S. Treasuries consolidated in their short term rise. The Shanghai Composite continued in broad consolidation in its downtrend and the Emerging Markets (NYSE:EEM) were pausing in their move lower.
CBOE Volatility looked to remain elevated, keeping in the new higher range. This continued to keep the bias lower for the equity index ETF’s (NYSE:SPY), (NYSE:IWM) and (NASDAQ:QQQ). Their charts showed the pressure with the IWM leading markets lower, the SPY (NYSE:SPY) breaking a range to join it and the QQQ dropping to the bottom of recent trading, hanging on by a fingernail.
The week played out with Gold moving higher, while Crude Oil broke the consolidation to the downside. The U.S. dollar gave up a little ground, but not a big move, while Treasuries moved higher early, but gave some back by Friday. The Shanghai Composite resumed it downtrend making a lower low while Emerging Markets drifted down to the October low.
Volatility picked up all week, moving to highs not seen since February and keeping the bias lower for equities. The Equity Index ETF’s started the week consolidating, but started to plummet following the FOMC statement Wednesday. Selling continued the rest of the week bringing the Index ETF’s into deep corrections. What does this mean for the coming week? Lets look at some charts:
SPY Daily
The SPY had just broken below a two month channel consolidation as the week started. It moved lower Monday to test the February lows and held there Tuesday. Wednesday it continued lower, reaching a 38.2% retracement of the move up off of the February 2016 low. That did not stop it though as it continued lower Thursday and then accelerated down Friday.
By the end of the week it had lost over 7.5% of its value and was 18% below the September high. The daily chart shows price well outside of the Bollinger Bands®. It also has a RSI into oversold territory with the MACD at levels not seen since 2008.
The weekly chart shows the worst weekly candle since 2008 as price fell below the 200 week SMA. It also has nearly retraced 50% of the move up off of the 2016 low. The RSI is on the edge of being oversold with the MACD driving lower. There is support lower at 238 and 236 then 232 and 227 before 223 and 219 then 209. Resistance comes at 241.50 and 246 then 248 and 249 before 250.50 and 254. Downtrend.
SPY Weekly
Heading into the Christmas shortened week equities look the worst they have in at least two years. Elsewhere look for Gold to continue in its uptrend while Crude Oil continues the path lower. The U.S. Dollar Index continues to mark time moving sideways while U.S. Treasuries are biased higher short term. The Shanghai Composite and Emerging Markets have resumed their downtrends.
Volatility looks to remain elevated and creeping higher keeping the bias lower for the equity index ETF’s SPY, IWM and QQQ. Their charts are in solid downtrends on both the daily and weekly view, with the IWM and QQQ in unofficial bear markets, off more than 20%, with the SPY close behind. Use this information as you prepare for the coming week and trade them well.
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