SPY Trends And Influencers: November 3, 2012

Last week’s review of the macro market indicators suggested, heading into next week the markets continued to look vulnerable. Gold (GLD) was still biased lower in the channel but possibly finding a bottom while Crude Oil (USO) looked better lower. The US Dollar Index (UUP) and Treasurys (TLT) seemed content to move sideways with longer term bias lower.

The Shanghai Composite (SSEC) was done with its bounce while Emerging Markets (EEM) continued to consolidate. Volatility (VIX) looked to remain low but was showing signs of life. These created a mixed environment for the Equity Index ETF’s (SPY), (IWM) and (QQQ), with the dollar and Treasurys supporting Equities while Volatility and Crude Oil pointing lower. The charts of the Indexes themselves all were biased to the downside.

The week quickly became historic with the exchanges closing for two days in a row for weather for the first time in over 120 years. The reopen with only 3 days ahead of the jobs report made for a hectic short week. Gold consolidated most of the week before breaking lower Friday while Crude Oil moved sideways and the US dollar drifted slightly higher, all three trading outside of US hours to start the week.

Treasurys remained in a tightening range. The Shanghai Composite consolidated at last weeks lows before moving higher while Emerging Markets held their range. Volatility fell back to support remaining subdued. The Equity Index ETF’s SPY, IWM and QQQ tested a move higher out of consolidation only to give some back on Friday after the nonfarm payroll report. What does this mean for the coming week? Let's look at some charts.

SPY Daily (SPY)

SPY Weekly (SPY)

The SPY broke the consolidation higher filling the gap only to be pushed back lower at the 20 and 50 day SMA cross to end the week with a bearish engulfing candle. The RSI continues to trend lower and is verging on bearish territory on the daily chart with a MACD that is diverging, negative but improving. Moving out to the weekly chart shows a continued creep to the rising trend support and 20 week SMA with a doji this week, signalling uncertainty.

The RSI is pulling back but remains bullish on this timeframe with a MACD that has crossed to negative. There is support lower at 140.10 and 139.50 followed by 137.70 and 133 before turning bearish at 125.80. Resistance is found higher at 142 and 144.44 followed by 147.70. Pullback or Consolidation in the Uptrend.

Heading into next week there is continued weakness. Gold and Crude Oil look better to the downside while the US Dollar Index seems to be turning up and US Treasurys are biased lower within the Uptrend. The Shanghai Composite and Emerging Markets are poised to continue consolidation, Chinese markets within the downtrend. Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ, despite the Dollar Index and Treasurys undercutting it. The Indexes themselves all look biased to the downside with a chance of consolidation within the longer term uptrends. 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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