SPY Trends and Influencers March 4, 2023

Last week’s review of the macro market indicators saw with only 2 trading days left in February, equity markets showed some weakness as they reacted to a less sanguine Fed in their discussion of disinflation. Elsewhere looked for Gold ($GLD) to continue its short term pullback while Crude Oil ($USO) consolidated in a tight range. The US Dollar Index ($DXY) continued to move to the upside while US Treasuries ($TLT) pulled back in consolidation. The Shanghai Composite ($ASHR) looked to continue to consolidate under resistance while Emerging Markets ($EEM) continued the move lower.

The Volatility Index ($VXX) looked to remain in the normal range and stable making the path easier for equity markets to the upside. Their charts were showing weakness on both timeframes but remained well above the prior lows, not threatening the nascent uptrends at this point. The $SPY and $QQQ also remained above the falling trendline that acted as resistance through 2022. The $IWM trend looked the strongest at this juncture.

The week played out with Gold finding support and reversing back to the upside while Crude Oil pushed to the top of the consolidation range. The US Dollar stalled and moved into consolidation while Treasuries melted lower but recovered Friday to end little changed. The Shanghai Composite found a bid and pushed up to an 8 month high while Emerging Markets found support and bounced at the end of the week.

The Volatility Index moved lower all week to end in the teens. This had little impact on equities early in the week the SPY and QQQ were unchanged by Wednesday with the IWM slightly higher, but it did create a positive environment. They all took advantage of that environment swing Thursday as Fed Presidents started to give more clarity and talk back the market’s rate hike expectations. They ended the week with a 2 day move higher and at 2 week highs. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week pulling back from a higher high and just above the 200 day SMA and below the 50 day SMA. It jumped up Monday clearing the 50 day and then move back lower Tuesday and Wednesday but held over the 200 day SMA. Thursday it gapped down below the 200 day SMA at the open and then proceeded to move higher in the afternoon. That is when Fed President Bostic began speaking and giving markets both more clarity and telling them their rate hike expectations may be a bit too aggressive.

It closed above the 50 day SMA Thursday and continued a strong move higher Friday to end the week at a 3 week high. If it continues higher this would also mark a second consecutive higher lower after a higher high, an uptrend, since the October low. The RSI on the daily chart is rising through the midline after holding at the lower edge of the bullish range with the MACD negative but leveling.

The weekly chart shows a recovery back over the 50 week SMA as it held above the falling trend resistance from 2022 acting now as support, a successful retest. The RSI is rising off the midline inching towards a move into the bullish zone with the MACD leveling but positive. There is resistance at 405.50 and 407.50 then 411 and 413.50 before 417.50 and 420 then 423. Support lower comes at 403.50 and 400.50 then 397.50 and 394.50 before 391 and 398 then 386. Uptrend.

SPY Weekly, $SPY

With February in the books, equity markets showed some strength with a rebound from a pullback following Fed comments. Elsewhere look for Gold to continue its short term rise while Crude Oil consolidates in a tight range. The US Dollar Index shifts into consolidation in its bounce while US Treasuries consolidate in a broad range. The Shanghai Composite looks to continue the move higher while Emerging Markets show hints of a continuation of the uptrend from the October low.

The Volatility Index looks to remain in the normal range and stable making the path easier for equity markets to the upside. Their charts are looking stronger, especially on the shorter timeframe. On the longer timeframe the IWM, the QQQ and SPY all remain in bull flags looking positive. Use this information as you prepare for the coming week and trad’em well.

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