SPY Trends And Influencers October 6, 2012

Last week’s review of the macro market indicators saw, as the 4th Quarter began there were more signs of short term weakness in the Equity markets. Gold (GLD) looked strong though and ready to move higher while Crude Oil (USO) had an upward bias but needs to confirm it. The US Dollar Index (UUP) was poised to continue the bounce in the downtrend while US Treasurys (TLT) were biased higher, but consolidating.

The Shanghai Composite (SSEC) was set up to continue its bounce in the downtrend with Emerging Markets (EEM) looking to continue lower off of resistance. Volatility (VIX) looked to remain subdued though making the picture for the equity index ETF’s SPY, IWM, and $QQQ, mixed. Low Volatility gives them a tailwind, but rising US dollar and Treasurys give Equities a downside bias. The charts of the SPY, IWM and QQQ broke the tie by supporting a short-term pullback within their uptrends.

Volatility set the tone moving lower all week. Elsewhere, Gold tested a break of the flag higher while crude oil gave a scare lower before a quick bounce back higher, giving no positive confirmation. The US dollar started to leak out of consolidation lower while Treasurys found a ceiling at the 50 day Simple Moving Average (SMA) and headed back lower.

The Shanghai Composite was closed for Golden week while Emerging Markets drifted higher. The Equity Index ETF’s moved higher with the SPY and QQQ leading the way and IWM only really trying to participate early Friday. What does this mean for the coming week? Let's look at some charts.

SPY Daily (SPY)

SPY Weekly (SPY)

The SPY rode the 20 day Simple Moving Average (SMA) higher all week before jumping off Thursday. A solid Black, intraday bearish, candle ended the week Friday but higher. The Relative Strength Index (RSI) on the daily timeframe is bullish and trending higher but may be stalling as the Moving Average Convergence Divergence indicator (MACD) continues to improve towards a bullish cross to positive. Both support further upside price movement.

The weekly view shows a bull flag building at multi-year highs with a RSI that is bullish and a MACD that is positive but fading. This is normal in a flag. The 20 week SMA is starting to lift off of the uptrend support line and could give the impetus higher. There is resistance at 147.70 and a target of 149.07 on a Measured Move above that. Support is found at 144.44 and 142 followed by 140.20. Consolidation in the Uptrend.

Heading into next week keep an eye on volatility as a signal for a turn, with the expectation that it will remain subdued. Gold looks to be set up to move lower short term but remain bullish longer term while Crude Oil looks lower, and may be seeking a bottom nearby. US Treasurys are set up to continue lower while the Dollar Index may continue to consolidate but is also biased lower.

The Shanghai Composite starts trading again with a bias to continue the bounce within the downtrend from before the holiday while Emerging Markets consolidate at resistance. These all set up for the US Equity Index ETF’s, SPY, IWM and QQQ to continue higher. The charts of the Indexes themselves agree with the bias but show signs of consolidation or a short pullback.

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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