SPY Trends And Influencers: Pause Or Pullback Coming?

Last week’s review of the macro market indicators suggested, heading into the March Options Expiration Week that the equity markets were feeling a bit euphoric. Elsewhere, Gold (GLD) looked to continue to consolidate with a downward bias while Crude Oil (USO) slowly decided if it wanted to move back higher.

The US Dollar Index (UUP) seemed strong like a lion while US Treasuries (TLT) played the part of the lamb. The Shanghai Composite (SSEC) was set up to continue to trend lower in the longer scale uptrend while Emerging Markets (EEM) consolidated with a bias to the upside.

Volatility (VIX) looked to remain very low, keeping the bias higher for the equity index ETFs S&P 500 (SPY), Russell 2000 (IWM) and the Nasdaq (QQQ), despite the strong moves higher recently. A reversal in US Treasuries could derail the equity rally and it would not be a surprise if the SPY and IWM consolidated or pulled back a bit in their trends higher.

The past week played out with Gold consolidating but with an upward drift while Crude Oil continued its drift higher. The US Dollar finally met some resistance in its move higher while Treasuries consolidated their move lower. The Shanghai Composite moved lower before bouncing to wend the week while Emerging Markets gave up their gains, breaking lower. Unhappy with its life as a teenager Volatility moved lower to become a pre-teen. The Equity Index ETF’s SPY and IWM continued higher with the QQQ stuck under resistance, perhaps holding everything back. What does this mean for the coming week? Lets look at some charts:

SPY Daily,

SPY Weekly,

The SPY nudged higher Monday and then consolidated all week. There was a bump Thursday that could have been related to moving to ex-dividend before it pulled back to that zone Friday. There are some cracks in the daily chart that suggest a pause or pullback.

The Relative Strength Index (RSI) is pulling back from the technically overbought area with a Moving Average Convergence DIveregence indicator (MACD) that is rising but nearing extreme levels on the signal line and the histogram is starting to fade. Looking out at the weekly chart the move higher over the rising wedge is continuing but with a RSI that is now technically overbought. It can run higher but caution is advised here.

The MACD on this timeframe is also getting to extreme levels on the signal line but the histogram is growing. Cautiously positive. There is support lower at 155 and 153.25 followed by 150. Resistance is now at 156.80 and then the all time high at 157.52 before a Measured Move higher to 159 followed by 177.

Continued Upside with a Chance of a Short Term Pullback.

Heading into this coming week, the equity markets are becoming mixed. Outside influencers see Gold continuing to hold a range with an upside bias for any break out while Crude Oil slowly grinds higher. The US Dollar Index looks ready to pullback in the uptrend while US Treasuries are biased lower. The Shanghai Composite and Emerging Markets are biased to the downside in the near term. Volatility looks to remain non-existent keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their chats are a mixed bag with the IWM the strong est followed by the QQQ building potential energy and the SPY perhaps ready to pullback or consolidate. If the US Dollar Index and Treasuries continue lower this will be a big tailwind for Equities.

Use this information as you prepare for the coming week and trade’m well.

Disclosure: 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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