SPY Trends And Influencers: November Into December 2012

Last month in this space my Monthly Macro Review/Preview had the monthly outlook suggesting further consolidation for Copper (JJC) and Gold (GLD) with an upward bias. Crude Oil (USO) was also in consolidation where Natural Gas (UNG) confirmed an upward bias.

US Treasurys (TLT) were in a broad consolidation within an uptrend and the US Dollar Index (UUP) was consolidating with a downside bias. The Shanghai Composite (SSEC) looked to continue lower as Emerging Markets (EEM) consolidate and the German DAX (DAX) looked strong, no change there.

Volatility (VIX) looked to remain low giving an upside bias to the US Equity Indexes. The other indicators also favored the upside for US stocks with only Treasurys, if they moved out of consolidation higher, giving downward pressure. The charts of the Equity Index ETF’s SPY, IWM and QQQ were in agreement with this bias with the SPY the strongest followed by the IWM and the QQQ bringing up the rear with the best chance of continued short-term pullback. How does an additional month impact the longer term picture? Let’s look at some charts.

SPY (SPY)

The SPY printed another possible reversal candle, a Hanging Man, after the tweezers top of September and October. This continues to happen around the full retest of the move lower during the financial crisis. It is worth noting that the tail of this month’s candle touched the lower Fibonacci Fan line, the spot where it rallied higher from the last touch in October 2011.

Resistance higher is found at 147.32 and above that carries a target of 156.21 and a 138.2% Fibonacci extension to 171.89. Support below is found at 132.95 and 125.81. A move under that turns bearish with 113.50 as support.

Short-Term Consolidation in the Uptrend.
The monthly outlook suggests continued consolidation in their ranges for the metals Gold and Copper, along with Crude Oil. Natural Gas retains the bullish bias but with topping signs. The US Dollar Index and US Treasurys both look to continue a pause in their long-term uptrends, with the dollar biased lower. Foreign markets are mixed with the Shanghai Composite looking horrible and the German DAX very good, but Emerging Markets in consolidation.

Volatility can go either way but looks to remain above the lower range experienced in the last six months with the VIX in a narrow range between 15 and the low 20′s. With low volatility, the Equity Index ETF’s SPY, IWM and QQQ are set up to continue higher in the coming months, but the current consolidation may continue for a little first.

A major move by the dollar or Treasurys lower or the Shanghai Composite higher could boost US Equities, whereas renewed strength in the dollar or Treasurys could create a pullback. Use this information to understand the long-term trends in Equities and their influencers as you prepare for the coming months.

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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