SPY Trends And Influencers: December 12, 2015
Dragonfly Capital | Dec 13, 2015 12:22AM ET
A weekly excerpt from the Macro Review analysis sent to subscribers on 10 markets and two timeframes.
Last week’s review of the macro market indicators suggested heading into the week that the equity markets looked mixed in the short run and at resistance, while better in the intermediate term. Elsewhere looked for gold (N:GLD) to continue the bounce in its downtrend, while crude oil (N:USO) continued lower.
The US Dollar Index (N:UUP) was biased lower in the short term in its uptrend while US Treasuries (N:TLT) looked lower in the broad consolidation. The Shanghai Composite (N:ASHR) looked better to the upside but with resistance nearby while Emerging Markets (N:EEM) were biased to the downside. Volatility (N:VXX) looked to remain subdued, keeping the bias higher for the equity index ETFs N:SPY, N:IWM and O:QQQ.
Short term the QQQ looked best and ready to challenge the all-time high while the SPY and IWM lagged. Longer term they were all at prior consolidation areas and needed a catalyst. After a week where the ECB disappointed, the FOMC was pushing hard with rhetoric it will tighten, that the equity indexes did not crater was viewed as strength.
The week played out with gold probing lower before rebounding to end the week slightly down, while crude oil continued lower to new 7 year lows. The US dollar ended its bounce and moved lower while Treasuries consolidated before moving higher Friday. The Shanghai Composite fell lower while Emerging Markets crashed and burned back to the September lows.
Volatility fell to the bottom of the range to start the week but then moved steadily higher. The Equity Index ETFs all came into the week in consolidation ranges but moved lower all week. The SPY made a new 2 month intraday low, and the IWM touched into the October gap, while the QQQ broke its consolidation range. What does this mean for the coming week? Lets look at some charts.
SPY Daily
The SPY entered the week following a strong Friday move. Monday digested that move holding over the 20 day SMA. But the rest of the week was downhill. Tuesday brought a tight range day but lower and was followed Wednesday and Thursday holding above the 150 day SMA. Friday started with a bang to the downside, opening a gap, and continued lower in a trend day all day. The drop made for a lower low to go with the lower high. A slow downtrending channel perhaps.
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The daily chart shows the RSI dipping into the bearish zone with the MACD falling. These support more downside. On the longer weekly timeframe, the pattern is repeating. Will it bring a bounce to resistance this week and then small body candles again? The RSI on this timeframe is bullish but falling through the mid line with the MACD rising. Better on this timeframe. There is resistance higher at 204.40 and 206.4 followed by 208.4 and 209. Support lower comes at 201.75 and 200 before 199 and 195. Short Term Downward Bias in Consolidation.
SPY Weekly
Heading into Options Expiration Week, the last full week before Christmas and the FOMC meeting, the equity markets look weak in the short run and all but the QQQ tired or weak on the intermediate term. Elsewhere look for gold to consolidate in it downtrend while crude oil runs lower. The US dollar index is back into consolidation with a short term downward bias while US Treasuries are biased higher in consolidation. The Shanghai Composite looks better to the downside short term in its bounce and Emerging Markets flat out broken and falling, but oversold.
Volatility looks to remain elevated, keeping the bias lower for the equity index ETFs SPY, IWM and QQQ. Their charts look weak in the short term as well. In the intermediate term, the IWM is nearing key support, and the SPY testing a shift to a downside bias while the QQQ is still the strongest. Use this information as you prepare for the coming week and trad’em well.
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