SPY Trends and Influencers May 7, 2022

Last week’s review of the macro market indicators saw with April in the books, equity markets were off to their worst start in over 80 years and in downtrends. Elsewhere looked for Gold ($GLD) to continue the short term pullback while Crude Oil ($USO) consolidated in its uptrend. The US Dollar Index ($DXY) continued a strong move higher but was at resistance while US Treasuries ($TLT) continued to trend lower. The Shanghai Composite ($ASHR) looked to bounce in its downtrend while Emerging Markets ($EEM) continued to trend lower.

The Volatility Index ($VXX) looked to remain elevated and possibly continuing higher making the path easier for equity markets to the downside. Their charts also looked weak, especially on the longer timeframe. On the shorter timeframe both the $QQQ and $SPY were attempting to consolidate in the downtrend, while the $IWM made new lows.

The week played out with Gold bouncing around in a tight range under 1900 while Crude Oil broke consolidation to the upside. The US Dollar met resistance at the late 2016 highs while Treasuries continued the move lower retracing nearly the full move up from October 2018. The Shanghai Composite started higher retesting the April breakdown area before reversing while Emerging Markets fell back to retest the March low.

Volatility fell back early but jumped mid week to end little changed at elevated levels. This put pressure on equities late in the week with a 2 day move lower. This resulted in the SPY retesting the early week low and the QQQ reaching a new 13 month low while the IWM fell back to December 2020 levels. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week retesting the February lows. It probed lower Monday before recovering and moved slightly higher Tuesday. Wednesday it took off to the upside following the FOMC announcement and presser, with its best day since April 2020. Unfortunately, that was followed by its worst day since June 2020 the very next day erasing the entire gain and then some.

Friday it held after a wide ranging day, printing a doji and the lowest close in early a year. The daily chart shows the 411 level gathering significance, but with the Bollinger Bands® opened to the downside. The RSI is holding in the bearish zone with the MACD negative and dropping.

The weekly chart shows a long legged doji print, after touching near the 200 week SMA for the 1st time in 2 years. It has now pulled back to the 161.8% extension of the retracement of the pandemic drop. The RSI is holding in the bearish zone with the MACD negative and dropping. There is support at 411 and 407.25 then 405.50 and 403.50 then 400.50. Resistance higher is at 413.75 and 417 then 420 and 423 before 425.50. Downtrend.

SPY Weekly, $SPY

With the first week of May in the books, equity markets remain in downtrends. Elsewhere look for Gold to pullback while Crude Oil may resume the uptrend. The US Dollar Index continues to the upside while US Treasuries trend lower. The Shanghai Composite looks to continue lower while Emerging Markets trend to the downside.

The Volatility Index looks to remain elevated making the path easier for equity markets to the downside. Their charts also look weak, especially on the longer timeframe. On the shorter timeframe both the QQQ and IWM are also weak and look better lower. The SPY sits at support though with a breakdown would join them lower. Use this information as you prepare for the coming week and trad’em well.

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