SPY Trends and Influencers December 24, 2022

• Posted by Greg Harmon
• on December 24th, 2022

Last week’s review of the macro market indicators saw with the last FOMC meeting and Quad Witching done for the year, equity markets had resumed their moves lower. Elsewhere looked for Gold ($GLD) to consolidate in the uptrend while Crude Oil ($USO) moved lower. The US Dollar Index ($DXY) continued the trend lower while US Treasuries ($TLT) stalled in their short term uptrend. The Shanghai Composite ($ASHR) looked to continue the short term uptrend while Emerging Markets ($EEM) consolidated in their short term move higher.

The Volatility Index ($VXX) looked to remain in the normal range making the path easier for equity markets to the upside. It also made the Indexes more vulnerable to news based moves like we saw during the week following the CPI report and FOMC meeting. Their charts showed that weakness from the short term view leaking into the longer term view and the weekly pictures also rolled over. On the shorter timeframe both the $QQQ and $IWM looked vulnerable to a retest of the October low. The $SPY looked slightly better, but only because it had further to go to retest it.

The week played out with Gold pushing to the upside early and meeting resistance then dropping back to finish nearly unchanged while Crude Oil reversed to the upside. The US Dollar found support and held in a narrow range while Treasuries moved lower. The Shanghai Composite pulled back from long term resistance while Emerging Markets continued in short term consolidation.

The Volatility Index continued to hold in the low 20’s leaving a neutral environment for equities. The SPY and IWM responded by bouncing in a wide consolidation range holding above the October lows. The QQQ continued the trend lower, though and is quickly approaching a retest of the November low. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week at a 5 week low and the 38.2% retracement of the post pandemic move higher. It traded back and forth in a sizable range but ended the week down less than 1 point. The daily chart shows the strong move Thursday followed by a gain Friday to kick off the Santa Claus Rally period, saving the week. The RSI is holding above the bearish zone with the MACD falling and negative.

The weekly chart shows a doji print on the week raising hope for confirmation of a reversal higher next week to end the year. The RSI on this timeframe is holding at the midline with the MACD flat and negative. There is resistance at 386 and 389 then 391 and 394.50 before 397.50 and 400.50 then 403.50. Support lower sits at 382 and 380 then 376 and 373 before 369 and 364.50. Consolidation in Pullback.

SPY Weekly, $SPY

With 4 trading days left in 2022, equity markets showed some divergence. The SPY and IWM put in consolidation weeks, saved by end of week moves higher while the QQQ continued to move lower and is approaching a retest of the year’s low. Elsewhere look for Gold to consolidate around 1800 while Crude Oil consolidates in the downtrend. The US Dollar Index looks to pause in the downtrend while US Treasuries resume the move lower. The Shanghai Composite looks to have reversed to a short term downtrend while Emerging Markets consolidate.

The Volatility Index looks to remain in a normal range making the path easier for equity markets to the upside. Their charts continue to look weak, especially the QQQ on the longer timeframe. On the shorter timeframe both the IWM and SPY are trying to consolidate and possibly put in a bottom, while the QQQ diverges as it continues lower. Use this information as you prepare for the coming week and trad’em well.

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