SPY Trends And Influencers: January 26, 2013

Last week’s review of the macro market indicators suggested, heading into the shortened holiday week that the markets continued to look bullish. Gold (GLD) looked set to continue higher within the sideways channel while Crude Oil (USO) continued its rise. The US Dollar Index (UUP) seemed content to move sideways while US Treasurys (TLT) were biased higher in the downtrend.

The Shanghai Composite (SSEC) and Emerging Markets (EEM) were biased to the upside on a break of their recent consolidations. Volatility (VIX) looked to remain low and biased to move lower keeping the bias higher for the equity index ETF’s (SPY), (IWM), and (QQQ). There seemed to be some rotation from the IWM into the SPY and now the QQQ was clearly lagging in a consolidation zone, keep an eye on it.

The week played out with Gold drifting higher early only to crash late in the week while Crude Oil moved up but is pace is slowing. The US Dollar continued sideways while Treasurys hung on before losing ground Friday. The Shanghai Composite continued to consolidate in a tight range while Emerging Markets gave up some of their gains, down to support.

Volatility remained at extreme lows. This allowed the Equity Index ETF’s to continue higher with the SPY and IWM making new multi-year highs but the QQQ still lagging in eh consolidation zone. What does this mean for the coming week? Let's look at some charts.

SPY Daily (SPY)
SPY Weekly (SPY)

The SPY continued its march higher towards the Inverse Head and Shoulders price objective of 156. The shorter Simple Moving Averages (SMA) are turning up, joining the Bollinger bands, and the Relative Strength Index (RSI) on the daily chart has now become technically overbought. Not extreme to the point of looking to sell but cautionary. The Moving Average Convergence Divergence (MACD) histogram is positive but has been running flat as the signal line continues higher.

This level on the MACD has led to corrections in the past and many are calling for that now, but there is still no sign or a turn lower. The weekly view shows price near the top of the rising wedge but with support for more upside from a rising and bullish RSI, a MACD that is positive and growing and expanding Bollinger bands. There is a Measured Move higher to 155 and support lower is found at 147 and 144.44. Continued Uptrend.

Moving into the last week of January the markets are still strong but getting a little cautious. Gold and Crude Oil are consolidating with Gold better lower while Crude Oil is better higher. The US Dollar Index shows no signs of changing its sideways movement while US Treasuries are biased lower. The Shanghai Composite and Emerging Markets are consolidating in their uptrends with the Shanghai Composite the best bet for a pullback in the near-term.

Volatility looks to remain at unusually low levels keeping the bias for the equity index ETF’s higher. The SPY and IWM may be ready to turn over the leadership to the QQQ, as both are becoming overbought. Use this information as you prepare for the coming week and trad’em 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