Last week’s review of the macro market indicators suggested heading into December that the equity markets looked solid and may have new leadership.
Elsewhere looked for gold (N:GLD) to continue lower while crude oil (N:USO) built a bear flag in its longer downtrend. The US dollar index (N:UUP) was breaking out to multi-year highs while US Treasuries (N:TLT) consolidated with a short term bias higher. The Shanghai Composite (N:ASHR) broke consolidation to the downside and was resuming the downtrend, while Emerging Markets (N:EEM) were moving lower after failing at resistance.
Volatility (N:VXX) looked to remain subdued and possibly fall keeping the bias higher for the equity index ETFs N:SPY, N:IWM and O:QQQ. The SPY and QQQ paused last week and the IWM had taken over leadership in the short term. All looked positive on the intermediate term chart.
The week played out with gold holding steady before a large bounce at the end of the week while crude oil drifted lower testing support twice. The US dollar moved slightly higher ahead of the ECB decision, but then fell hard while Treasuries tested higher but then pulled back. The Shanghai Composite found support and bounced while Emerging Markets continued to drift lower.
Volatility had a volatile week starting lower but then spiking and finally recovering to near unchanged. The Equity Index ETFs started the week drifting near the highs, but then pulled back Wednesday, with all recovering somewhat Friday except for the IWM. What does this mean for the coming week? Lets look at some charts.
SPY Daily
The SPY started the week in consolidation like the prior week but Tuesday saw it breaking to the upside with a strong candle. Wednesday’s bearish engulfing candle through a wet blanket on the euphoria though and Thursday continued lower to the 150 day SMA. It bounced there with a strong move higher Friday above the Thursday candle, back to last week’s consolidation level. A lot of movement to end up back where it started, but putting in place a higher low.
The daily chart shows the RSI holding in the bullish zone and reversing higher while the MACD is struggling to join, moving sideways. On the weekly chart the action made for a doji Hanging Man, but in the consolidation range it does not carry much weight as a reversal signal. The RSI continues to struggle to move into the bullish zone over 60 though with the MACD rising. There is resistance at 210.25 and 211 followed by 212.50 and 213.70. Support lower comes at 209 and 208.40 followed by 206.40 and 205.70. Consolidation in the Long Term Uptrend.
SPY Weekly
Heading into next week, the equity markets look mixed in the short run and at resistance, while better in the intermediate term. Elsewhere look for gold to continue the bounce in its downtrend, while crude oil continues lower. The US dollar index is biased lower in the short term in its uptrend, while US Treasuries look lower in the broad consolidation.
The Shanghai Composite looks better to the upside, but with resistance nearby while Emerging Markets are biased to the downside. Volatility looks to remain subdued keeping the bias higher for the equity index ETFs SPY, IWM and QQQ. Short term, the QQQ looks best and ready to challenge the all-time high while the SPY and IWM lag. Longer term, they are all at prior consolidation areas and need a catalyst.
After a week where the ECB disappointed, the FOMC is pushing hard with rhetoric it will tighten, and that the equity indexes did not crater can also be viewed as strength. Use this information as you prepare for the coming week and trad’em well.
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