SPY Trends And Influencers: August 26, 2012

Last week’s review of the macro market indicators saw heading into the new week it looked like the markets were very similar to the previous week's view. Gold and crude oil looked best to continue higher, with a chance that gold consolidates further. The US Dollar Index looked to consolidate, but with an upward bias and Treasurys looked to continue lower.

The Shanghai Composite looked to set new multi-year lows while Emerging Markets consolidated further before another upside move. Volatility looked to continue towards historic lows allowing for the Equity Index ETF’s SPY, IWM and QQQ to continue their rise to multi-year highs. The SPY looked the best followed by the QQQ and then the IWM, which was still among some previous congestion. It seemed only a hard reversal by Treasurys could derail this market now.

The week played out with gold ripping higher while crude oil also moved up, but consolidated some gains later in the week. The US dollar broke lower and found a bottom while Treasurys rebounded to fill upside gaps. The Shanghai Composite continued to consolidate in a tight range at the recent lows while Emerging Markets gave up some of their gains, perhaps rolling over. Volatility bounced off of the lows but remained subdued. The Equity Index ETF’s peaked with the SPY and QQQ making new multi-year highs before all gave back some ground late in the week. What does this mean for the coming week? Let's look at some charts.

SPY Daily (SPY)

SPY Weekly (SPY)

The SPY made a new multi-year high early in the week before pulling back. It found support at the rising 20-day SMA with printed a bullish engulfing candle to end the week. The RSI pulled back slightly within bullish territory but held a higher low and is rising again with a MACD that is negative after crossing Thursday but is threatening a return higher. Signals suggest a potential pullback or consolidation on this timeframe.

The weekly view shows a thin body candle and potential consolidation near the previous highs. The RSI on this timeframe is bullish and trending higher with a MACD that is positive and rising, supporting further upside but there are no surprises that it does not blast through the pre-crisis highs. The Measured Move higher if it can gain some separation takes it to 153.60 well short of the 3-box reversal Point and Figure (PnF) target of 190. Support lower comes at 140 followed by 137.90 and 135.40.

Chance of Short-Term Pullback within the Uptrend

As the last week of unofficial summer begins look for gold and crude oil to continue higher with a chance of consolidation for either. The US Dollar Index seems biased lower in the uptrend while US Treasurys may move in a tight range. The Shanghai Composite looks lower still and Emerging Markets looking like consolidation or small pullback within the uptrend.

Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. The whole picture, except for some risk that Treasurys pop higher, sets up positive for equities. The charts of the Index ETF’s are not so certain though. The SPY and QQQ both look much better to the upside especially in the longer timeframe but the IWM seems more comfortable in a range for the time being with an upward bias. 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.

Original post