SPY Trends and Influencers February 4, 2023

• Posted by Greg Harmon
• on February 4th, 2023

Last week’s review of the macro market indicators saw with just 2 trading days left in January, equity markets were showing strength as they moved higher. And with the Santa Claus Rally and 1st Five Days of January both positive it seemed a lock that there would also be a Positive January to have all 3 indicators align to set up a positive performance indication for all of 2023. Elsewhere looked for Gold ($GLD) to continue its uptrend while Crude Oil ($USO) consolidated in a tight range. The US Dollar Index ($DXY) continued to drift to the downside while US Treasuries ($TLT) consolidated the bounce in their downtrend.

The Shanghai Composite ($ASHR) came back from holiday looking to continue the move higher while Emerging Markets ($EEM) continued to enjoy an uptrend. The Volatility Index ($VXX) looked to remain normal and stable making the path easier for equity markets to the upside. Their charts looked strong on both timeframes. On the shorter timeframe both the $QQQ and $IWM were making higher highs, with the $SPY and QQQ now over their respective 200 day SMA’s. On the longer timeframe the SPY and QQQ were also over falling trend resistance that had held them all of 2022. All were starting to look a lot more bullish.

The week played out with Gold meeting resistance and dropping back late in the week while Crude Oil moved back to the bottom of the consolidation range. The US Dollar found support and bounced to short term resistance as Treasuries moved early but gave back the gain Friday. The Shanghai Composite met resistance at the big round number 3300 and consolidated while Emerging Markets pulled back to support and consolidated. The Volatility Index remained in the normal zone finishing little changed. This allowed equities some breathing room.

They held in place through month end, completing the Trifecta with an up January, and then started a strong move higher after the FOMC Press Conference Wednesday. All found got knocked back Friday morning by a strong Non-Farm Payroll report, had recovered by mid day and ended back near the lows of the day. This resulted in the SPY, IWM and QQQ making higher highs on the weekly timeframe, confirming an intermediate term uptrend. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week over the down trending resistance that had halted its advances since the reversal began at the start of 2022. It pulled back to retest the trendline Monday and held then reversed higher Tuesday to a top Thursday. That put the SPY above the December high, following a higher low at the end of the year, confirming an uptrend. The daily chart shows the price ending Thursday above the Bollinger Bands® and then profit taking Friday. The RSI is strong in the bullish zone with the MACD rising and positive. The next major hurdle is the August high.

The weekly chart adds that the stall Thursday came at the 100 week SMA. The Bollinger Bands on this timeframe are opening higher. The RSI is rising toward 60 and a move into the bullish zone with the MACD crossing to positive. There is resistance at 413.50 and 417.50 then 420 and 423 before 425.50 and 428.50 then 430. Support lower comes at 411 and 407.50 then 405.50 and 403.50 before 400.50 and 397.50. Intermediate Term Uptrend.

SPY Weekly, $SPY

With the first month of the year in the books with positive performance statistically the prospects for a positive year are good, while near term markets also look strong. Elsewhere look for Gold to pause in its uptrend while Crude Oil drops to the low end of the consolidation range. The US Dollar Index looks to pause in the downtrend while US Treasuries consolidate in their bounce off lows. The Shanghai Composite looks to pause its uptrend while Emerging Markets may pause their move higher as well.

The Volatility Index looks to remain normal and stable making the path easier for equity markets to the upside. Their charts look strong, especially on the longer timeframe with the SPY confirming an intermediate term uptrend while the IWM and QQQ have established short term uptrends and are closing in on the intermediate term. On the shorter timeframe the SPY, IWM and QQQ all moved back within the Bollinger Bands Friday to ease tight momentum. Use this information as you prepare for the coming week and trad’em well.

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