SPY Trends and Influencers October 22, 2022

• Posted by Greg Harmon
• on October 22nd, 2022

Last week’s review of the macro market indicators saw heading into October options expiration and the height of earnings season, equity markets continued to look better to the downside. Elsewhere looked for Gold ($GLD) to continue its move lower while Crude Oil ($USO) reversed lower killing the short term trend higher. The US Dollar Index ($DXY) continued the trend to the upside while US Treasuries ($TLT) continued their downtrend.

The Shanghai Composite ($ASHR) had morphed to a short term trend higher in broad consolidation while Emerging Markets ($EEM) continued the long trend lower. The Volatility Index ($VXX) looked to remain elevated making the path easier for equity markets to the downside. Their charts looked weak on both timeframes. On the longer timeframe both the $IWM and $SPY were building flags, and looked a bit stronger than the $QQQ which continued to drive lower. On the shorter timeframe the charts continued to move in tandem.

The week played out with Gold continuing lower until a Friday bounce recovered nearly all the drop while Crude Oil found support and traded in a narrow range. The US Dollar held in consolidation just off of the highs while Treasuries continued down to new 11⅟₂ year lows. The Shanghai Composite met resistance and fell back while Emerging Markets held in a tight range.

Volatility dropped back slightly but remained elevated. This took some pressure off equities and they responded by starting the week with a 2 day move higher. All peaked Tuesday and drifted lower before a Friday bounce. This resulted in the SPY, IWM and QQQ ending the week 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 holding up after a big intraday move up off a new cycle low. It moved higher Monday and Tuesday, closing over the 20 day SMA. It pulled back Tuesday and Wednesday, but held over the 20 day SMA, the shot higher Friday. This marked the first time it closed back to back days above the 20 day SMA since the latest drop from the August high began. The daily chart shows the RSI pushing up through the midline with the MACD rising but still negative.

The weekly chart shows the move up out of consolidation and over the 200 week SMA. The RSI is turning higher towards the midline with the MACD curling up as well. These are promising moves but a far cry from a reversal confirmation. That would take a move over the August high. There is resistance at 376 and 380 then 386 and 389.50 before 391.50 and 394.50. Support lower comes at 373 and 369 then 364.50 and 360 before 358 and 356 then 353. Possible Reversal Building.

SPY Weekly, $SPY

With the October options expiration in the books, equity markets showed strength to end the week, continuing higher off the new lows from last week. Elsewhere look for Gold to continue hold at support in a pullback while Crude Oil consolidates in a downtrend. The US Dollar Index continues to hold at resistance in the uptrend while US Treasuries continue their downtrend. The Shanghai Composite looks to pause in its move higher while Emerging Markets continue their downtrend.

The Volatility Index looks to remain elevated but moving lower making the path easier for equity markets to the upside. Their charts are starting to look stronger, especially the SPY and QQQ on the weekly timeframe, but with IWM less strong. On the shorter timeframe they all still look a mess but with moves over the 20 day SMA giving hope a reversal is building. Use this information as you prepare for the coming week and trad’em well.

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