by Greg Harmon
Last week’s review of the macro market indicators suggested, heading into the next week, the markets looked strong but maybe a bit extended. We looked for Gold ($GLD) to continue higher in the downtrend while Crude Oil ($USO) slowed at resistance in the uptrend. The US Dollar Index ($UUP) looked to continue lower along with US Treasuries ($TLT) . The Shanghai Composite ($SSEC) and Emerging Markets ($EEM) were biased to the upside in their downtrends and have potential to reverse those trends with continued strong moves. Volatility looked to remain low and drifting lower keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ. All were biased higher with the QQQ looking the strongest the IWM and SPY perhaps extended a little in their uptrends.
The week played out with Gold holding steady while Crude Oil continued the move higher. The US Dollar consolidated the move lower from last week while Treasuries inched higher. The Shanghai Composite consolidated before dropping to end the week while Emerging Markets held their gains from last week. Volatility continued lower back to the May. The Equity Index ETF’s all liked this environment and responded with new highs for the SPY and IWM but with the QQQ giving back ground on some poor earnings reports. What does this mean for the coming week? Lets look at some charts.
As always you can see details of individual charts and more on my StockTwits feed and on chartly.)
SPY Daily, $SPY 
SPY Weekly, $SPY 
The SPY continued higher, navigating between the first and second Potential Reversal Zones (PRZ) of the bearish Shark Harmonic. The first has engages with a move over 168.06 and a reversal lower now would look for an Initial Price Objective (IPO) of 164.07 were it to start lower Monday. The higher Shark does not engage until a move over 170.22. The Relative Strength Index (RSI) on the daily chart shows a steady rise in bullish territory with room above, and the Moving Average Convergence Divergence indicator (MACD) is rising on the signal line, but the histogram is starting to pullback. Another sign of a potential reversal. The Measured Move higher comparable to the one from 153.55 would take it to 171.25, also nearby. On the weekly picture the move to new highs looks strong. The last major move was over 30 SPY points and if it happens again it is at 200. The RSI is rising and on the verge of a move into technically overbought territory with a MACD that is turning back higher to cross. Both are elevated. There is no resistance higher, but a Measured Move higher to 175. Support below is found at 168 and 166 followed by 163 and 161.60. Continued Upward Price Movement with Caution.
Closing the books on the July options cycle and moving in to August the markets are making new highs but looking a bit overdone. Look for Gold to continue the bounce in its downtrend while Crude Oil continues higher. The US Dollar Index looks lower or may consolidate while US Treasuries are bouncing in their downtrend. The Shanghai Composite looks weak again and headed lower as Emerging Markets are biased to the downside in their bounce in the downtrend. Volatility looks to remain low and biased lower keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ, despite the moves higher last week. Their charts are also biased to the upside in the mid term with the QQQ looking lower in the short term while the SPY and IWM could stand to consolidate their moves. Use this information as you prepare for the coming week and trad’em well.
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