SPY Trends and Influencers July 2, 2022

• Posted by Greg Harmon
• on July 2nd, 2022

Last week’s review of the macro market indicators saw with only 4 trading days left in the 2nd Quarter, equity markets mounted a strong rebound off of the lows and were set up for at least short term continuation. Elsewhere looked for Gold ($GLD) to continue to consolidate while Crude Oil ($USO) pulled back from the highs. The US Dollar Index ($DXY) looked to pause in its move to the upside while US Treasuries ($TLT) continued their downtrend. The Shanghai Composite ($ASHR) looked to continue the trend higher while Emerging Markets ($EEM) continued to move lower.

The Volatility Index ($VXX) looked to slowly ease from elevated ground making the path easier for equity markets to the upside. Their charts were looking stronger following the week’s move, especially on the shorter timeframe. On the longer timeframe the moves required to call a confirmed reversal were still far above, about 5% more for the $QQQ and 7% for the $SPY to make a higher high. It would take another 9% for the $IWM to get there. Those moves would only be first steps toward any potential reversal.

The week played out with Gold drifting lower and dipping under 1800 while Crude Oil found support and bounced to a lower high before retreating again. The US Dollar rose to retest the June high while Treasuries found support at a higher low and reversed higher. The Shanghai Composite hit resistance as it reached the 200 day SMA while Emerging Markets fell back to the June lows.

The Volatility Index stayed in a tight range and notably under 30 all week. The early week move slightly higher facilitated further selling in equities before a late week settling. This resulted in the SPY, the QQQ and the IWM all printing lower highs and then falling back. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week rising up off a fresh low. It opened higher Monday and could not hold up. Another attempt Tuesday touched the 20 day SMA and then it dropped lower. It continued lower through Thursday, dropping back below the 38.2% retracement of the post pandemic move higher, to end the 2nd Quarter. Friday started off weak again but rallied in light afternoon trading to finish back above the Fibonacci level into the long holiday weekend. The daily chart shows what could end up being a higher low upon continuation next week to the upside. The RSI is also making a higher low as it rises with the MACD negative but also moving higher.

The weekly chart shows a pause at that Fibonacci retracement level. The RSI is moving lower in the bearish zone though with the MACD negative and making new lows. There is support lower at 380 and 376 then 373 and 369 before 364.50. Resistance higher comes at 386 and 389.50 then 394.50 and 397.50 before 400.50 and 403.50. Short term it will take a move over 394.50 to gain interest on the long side with a longer term move over 418 to attract more. Bounce in Downtrend.

SPY Weekly, $SPY

With the 2nd Quarter in the books, equity markets finished the worst start of the year since 1970. They gave back more than half of the previous week’s gain on the week before a decent finish into the long weekend. Elsewhere look for Gold to continue to consolidate in its pullback while Crude Oil continues in a short term pullback. The US Dollar Index continues in an uptrend while US Treasuries are in a short term move higher in their downtrend. The Shanghai Composite looks to continue its uptrend while Emerging Markets continue to move lower.

The Volatility Index looks to remain elevated but moving lower making the path easier for equity markets to the upside. Their charts still look weak, especially on the longer timeframe. On the shorter timeframe the IWM, the QQQ and the SPY could be making higher lows, the possible start of a short term reversal. Next week will tell. Use this information as you prepare for the coming week and trad’em well.

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