SPY Trends and Influencers March 12, 2022

Last week’s review of the macro market indicators saw one week into the conflict in the Ukraine, the equity markets were looking jittery and volatile. It was not helping that it was also a time when the Fed Chairman was speaking before Congress just two weeks before the widely anticipated shift to a tightening monetary policy cycle. Elsewhere looked for Gold ($GLD) and Crude Oil ($USO) to continue their moves higher toward all-time highs. The US Dollar Index ($DXY) also looked to continue to the upside while US Treasuries ($TLT) consolidated in their downtrend. The Shanghai Composite ($ASHR) looked to continue in broad consolidation while Emerging Markets ($EEM) resumed their downtrend.

The Volatility Index ($VXX) looked to remain at a high level keeping the skittish news driven choppiness for equity markets. Their charts were looking weak on the shorter timeframe, making a series of lower highs since the end of the year tops. On the longer timeframe there were some mixed messages with the $SPY continuing to hold over 7 month support, the $IWM in sideways consolidation in a possible bear flag and the $QQQ drifting lower in what might be a reversal pattern.

The week played out with Gold flying up towards the August 2020 all-time high close and then dropping back to end the week little changed while Crude Oil also spiked to a peak Tuesday and then retreated. The US Dollar continued to move up and is now at 22 month highs while Treasuries dropped to 52 week lows. The Shanghai Composite crashed down through support before a partial rebound while Emerging Markets saw some consolidation after their recent breakdown.

Volatility remained elevated after spiking to a slightly lower high and then pulling in. This put initial pressure on equities and they responded with a choppy 2 day move lower. All found support by Wednesday and reversed but continued to chop at a slightly higher level. This resulted in the SPY and QQQ printing lower lows before their bounce, and the IWM continuing in a range under resistance. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week dropping back from a lower high but over support. Monday it crashed through support and continued lower Tuesday, printing a 9 month closing low. Wednesday it bounced back up to prior support now as resistance and stalled. It held there Thursday before a gap up Friday stopped right at resistance, and it sold off the entire day. The near bearish Marubozu candle bodes for more downside. The daily chart also shows the RSI making lower highs in the bearish zone with the MACD negative and dropping. The Bollinger Bands® are also pointing lower.

The weekly chart shows a break of support as well that held for 6 months. The RSI on this timeframe is now falling in the bearish zone with the MACD negative and moving lower. There is support at 420 and 417.40 then 413.75 and 411 before 407 and 403 then then magnet at 400. Resistance higher sits at 423 and 425.50 then 428.50 and 430.50 before 435.50 and 437.50. Downtrend.

SPY Weekly, $SPY

Heading into March options expiration, equity markets continue to show weakness in choppy trading. The coming week will likely be headline driven again with the Ukraine – Russia conflict and the FOMC meeting adding volatility. Elsewhere look for Gold to continue its uptrend while Crude Oil pulls back in its uptrend. The US Dollar Index continues to move to the upside while US Treasuries pullback in their downtrend. The Shanghai Composite looks to have established a downtrend while Emerging Markets continue their move lower.

The Volatility Index looks to remain elevated making the path difficult for equity markets. Their charts look weak, especially the SPY and the QQQ on the longer timeframe. On the shorter timeframe both the QQQ and SPY are choppier. The IWM has held in consolidation on both timeframes, relative strength. Use this information as you prepare for the coming week and trad’em well.

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