by Greg Harmon
Last week’s review of the macro market indicators suggested, heading into the next week to look for Gold ($GLD) to consolidate with a downward bias while Crude Oil ($USO) moved higher. The US Dollar Index ($UUP) and US Treasuries ($TLT) looked to continue lower. The Shanghai Composite ($SSEC) and Emerging Markets ($EEM) were also biased to the downside. Volatility ($VIX) looked to remain low but slowly trending higher making the bias lower for the equity index ETF’s $SPY, $IWM and $QQQ, in the short run. Their charts also showed signs of a pullback with than SPY and QQQ both weaker than the IWM.
The week was highly influenced by the Fed meeting and played out with Gold leaking before releasing the floodgates lower while Crude Oil moved up, only to give back two weeks of gains to end the week. The US Dollar found a bottom and turned up while Treasuries fell out of consolidation lower. The Shanghai Composite continued down out of consolidation while Emerging Markets did the same. Volatility bounced after the Fed meeting but remained below our trigger at 22. The Equity Index ETF’s started higher with the but that ended after the Fed announcement as the SPY, IWM and QQQ gapped lower Thursday and raised some hope with potential reversal candles Friday after starting lower. 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 started the week moving higher, making a higher high before pulling back after the FOMC statement and press conference. The pullback accelerated Thursday as it moved below the rising trend support and finally found some support Friday at the 100 day Simple moving Average (SMA), ending the week with a Hammer. The Hammer is a potential reversal candle if confirmed higher Monday. Through this the Relative Strength Index (RSI) is making a new lower low not seen since November and the Moving Average Convergence Divergence indicator (MACD) is moving lower on strong volume. This view does not give a convincing picture that the bottom is in yet. The weekly picture shows the pullback nearly to the former resistance of the wedge it broke out of in March. The RSI on this timeframe is also trending lower with a MACD that has just crossed down on the signal line. There is support lower at 158.10 and 157.10 followed by 153.50. Resistance should it reverse comes first at 159.70 and then 161.60 and 163. A move back over 166 would seal a reversal higher. Continued Pullback in the Uptrend.
Heading into the first week of summer the markets are continuing to look weak. The week may start with a bounce as they have run down pretty fast. Look for Gold to consolidate or bounce before continuing the downtrend while Crude Oil moves lower in the prior broad channel. The US Dollar Index looks ready to continue higher while US Treasuries continue lower. The Shanghai Composite and Emerging Markets are biased to the downside with risk of the Emerging Markets consolidating first. Volatility looks to keep drifting higher keeping the bias lower for the equity index ETF’s SPY, IWM and QQQ. Their charts are in agreement with the IWM noticeably stronger than both the SPY and QQQ. Use this information as you prepare for the coming week and trad’em well.
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