SPY Trends and Influencers October 15, 2022

Last week’s review of the macro market indicators saw with the first week of October in the books, equity markets continued the trend lower after a big 2 day tease at the start of the week to the upside. Elsewhere looked for Gold ($GLD) to continue its bounce in the downtrend while Crude Oil ($USO) was possibly reversing higher out of its downtrend. The US Dollar Index ($DXY) continued the strong move to the upside while US Treasuries ($TLT) continued their downtrend. The Shanghai Composite ($ASHR) looked to continue the move lower after a week off while Emerging Markets ($EEM) continued the long term downtrend.

The Volatility Index ($VXX) looked to remain elevated and possibly moving higher making the path easier for equity markets to the downside. Their charts also looked weak, especially on the shorter timeframe where the $SPY and $QQQ were back retesting the cycle lows while the $IWM was faring only slightly better. On the longer timeframe the candle prints for the week signaled indecision but with long upper shadows indicating further weakness.

The week played out with Gold reversing to the downside while Crude Oil met resistance ealy and fell back. The US Dollar met resistance and stalled at a lower high while Treasuries continued the downtrend printing new 11 year lows. The Shanghai Composite found support mid week and recovered to end up on the week while Emerging Markets reached an 88.6% retracement of the post pandemic move and bounced.

Volatility drifted up to the September highs and held there before a slight drop late in the week. Equities responded with a flatt start to the week before a large drop and reversal intraday Thursday following the CPI print. All saw profit taking Friday to end the week with the SPY and QQQ unchanged while the IWM finished slightly higher. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week falling back toward the September low as it rejected a move higher when it hit the 20 day SMA. It continued lower early in the week, printing a new cycle low Wednesday. Thursday saw a gap down open hit the 50% retracement of the post pandemic move higher, and then drove higher all day. It ended the day nearly 5% off the low and near the 20 day SMA.

Friday it opened with a gap up at the 20 day SMA and moved over it but could not hold there and sold off the rest of the day. It ended at the low of the day printing a Dark Cloud Cover candlestick boding for more downside. The daily chart shows the RSI falling back in the bearish zone with the MACD flat and negative.

The weekly chart shows price holding near the 200 week SMA, building a small bear flag. The RSI on this timeframe is flat in the bearish zone with the MACD negative and moving lower. Support lower comes at 365 and 353 then 348.20 and 346 before 344.70 and 342. Resistance higher sits at 358 and 360 then 364.50 and 369 before 373 and 376 then 380. Downtrend.

SPY Weekly, $SPY

Heading into October options expiration and the height of earnings season, equity markets continue to look better to the downside. Elsewhere look for Gold to continue its move lower while Crude Oil reverses the lower killing the short term trend higher. The US Dollar Index continues the trend to the upside while US Treasuries continue their downtrend. The Shanghai Composite has morphed to a short term trend higher in broad consolidation while Emerging Markets continue the long trend lower.

The Volatility Index looks to remain elevated making the path easier for equity markets to the downside. Their charts look on both timeframes. On the longer timeframe both the IWM and SPY building flags, look a bit stronger than the QQQ which continues to drive lower. On the shorter timeframe the charts continue to move in tandem. Use this information as you prepare for the coming week and trad’em well.

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