SPY Trends and Influencers January 22, 2022

Last week’s review of the macro market indicators saw heading into a short week and January options expiration, that equity markets showed early promise but failed to hold the early week gains. Elsewhere looked for Gold ($GLD) to continue its rise in consolidation while Crude Oil ($USL) drove higher. The US Dollar Index ($DXY) continued a pullback in the uptrend while US Treasuries ($TLT) pulled back in a consolidation range.

The Shanghai Composite ($ASHR) looked to pullback in consolidation while Emerging Markets ($EEM) bounced in the downtrend. The Volatility Index ($VXX) looked to remain in the normal range taking the pressure off equity markets. Their charts continued to show strength in the longer timeframe but with short term weakness. The $IWM and $QQQ looked the weakest on the short timeframe with the $SPY faring slightly better.

The week played out with Gold pushing to the upside while Crude Oil broke to a new 7 year high before stalling. The US Dollar found support in its pullback and bounced while Treasuries made a new low early before reversing and ending higher. The Shanghai Composite continued the move lower in consolidation while Emerging Markets remained in a downward trending channel.

Volatility jumped Tuesday and continued higher all week. This put pressure on equities and they moved lower early. Thursday saw an early day bounce turn to an ugly sell off in the afternoon and continued selling Friday. This resulted in the QQQ ending more than 10% off the highs, in correction territory, the SPY over 8% from the top and the IWM falling under 200. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week in consolidation. It started lower Tuesday and accelerated as the week progressed. By Friday it had sliced through the 200 day SMA for the first time since April 2020. It closed just pennies off the low of the week and with the highest volume since June 2020. It is now nearly 9% from the all-time high. The daily chart shows the RSI dipping into oversold territory with the MACD negative and dropping at the lowest level since April 2020.

The weekly chart shows price printing a bearish Marubozu candle, boding for more downside. The 50 week SMA sits just below at the lower edge of the Bollinger Bands®. The RSI is dropping through the midline with the MACD crossed down but positive. There is support lower at 437.50 and 435.50 then 430.50 and 428.50 before 425.50. Resistance above sits at 441 and 444 then 447 and 450 before 454 and 457. Pullback.

SPY Weekly, $SPY

With January options expiration in the books, equity markets are off to an ugly start for 2022. Elsewhere look for Gold to continue higher in consolidation while Crude Oil continues the uptrend. The US Dollar Index continues to drift to the upside in consolidation while US Treasuries consolidate. The Shanghai Composite looks to consolidate as well while Emerging Markets continue the downtrend.

The Volatility Index looks to remain elevated, possibly moving higher, making the path easier for equity markets to the downside. Their charts look weak and trending lower on the shorter timeframe. On the longer timeframe both the QQQ and SPY are shifting into troubled looks. The IWM is now in a downtrend. Use this information as you prepare for the coming week and trad’em well.

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