SPY Trends: Continued Upward Bias with Caution

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 last week before the Holiday Season begins that the markets continued to look strong. The week looked for Gold (GLD) to consolidate in the longer downtrend while Crude Oil (USO) also held in the downward move. The US Dollar Index (UUP) looked better lower in the current short uptrend while US Treasuries (TLT) looked to consolidate their move. The Shanghai Composite (SSEC) and Emerging Markets (EEM) were biased to the upside in the very short term with Chinese markets still lower long term and Emerging Markets in a rut. Volatility (VIX) looked to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ, despite the moves higher the past week. Their charts showed the possibility for the next rotation, into IWM and out of QQQ.

The week played out with Gold taking a turn for the worse lower while Crude Oil showed some signs of life. The US Dollar made a higher low and reversed while Treasuries rejected the first trip higher making a lower high. The Shanghai Composite did move higher while Emerging Markets peaked Monday and fell back. Volatility made a weak attempt to move higher, before falling back. The Equity Index ETF’s opened the week at or near highs only to fall back and then make new highs. What does this mean for the coming week? Lets look at some charts.

SPY Daily, SPY

SPY Weekly, SPY

The SPY entered the week with a Bearish Engulfing candle Monday following an Advance Block, boding for lower prices. That lasted all of two days though before two bullish candles higher and a close for the week at new all-time highs. The daily chart shows a Measured Move now to 182.39 higher supported by a RSI that is bullish and rising and a MACD that is positive and steady. The weekly picture is also bullish but with some caution signs. The Hanging Man candle signals a reversal if confirmed lower next week, and the RSI is venturing into technically overbought territory. It is not at extreme levels and could go higher still and the MACD rising supports that as well. Some will point out that the price is outside of the top Bollinger band for the second straight week, but you need a magnifying glass to recognize that. The trend continues to be higher. There is no resistance higher and the Measured Move to 187.50 mentioned last week remains. Support lower comes at 178.50 followed by 177.65 and 175.93. Continued Upward Bias with Caution.

Heading into the shortened Holiday week, the markets look healthy. In the coming week look for Gold to continue lower while Crude Oil consolidates and may reverse higher. The US Dollar Index remains biased to the upside while US Treasuries are biased lower. The Shanghai Composite and Emerging Markets are biased to the upside with risk of Emerging Markets running in place. Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. All continue to look better to the upside but the IWM looks the strongest of the Index ETF’s with the SPY and QQQ raising some caution flags on the weekly charts. 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.

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