SPY Trends and Influencers January 6, 2024

Last week, the review of the macro market indicators saw with 2023 in the books, equity markets showed major strength with a strong move higher in the Nasdaq all year that surpassed the large cap S&P 500 move that started in late 2022. Elsewhere looked for Gold ($GLD) to continue its uptrend while Crude Oil ($USO) continued to move lower. The US Dollar Index ($DXY) looked to continue to drift to the downside while US Treasuries ($TLT) stalled in their uptrend. The Shanghai Composite ($ASHR) looked to bounce in its trend lower while Emerging Markets ($EEM) consolidated in a broad range.

The Volatility Index ($VXX) looked to remain very low and stable making the path easier for equity markets to the upside. Their charts looked strong, especially on the longer timeframe. On the shorter timeframe the $SPY, the $QQQ and the small cap $IWM could use a reset on momentum measures as all were extended. The IWM was pulling back with the SPY and QQQ looking vulnerable in the short term as well.

The week played out with Gold falling through support and dropping back before a bounce Friday while Crude Oil found support and caught a bid to move slightly higher. The US Dollar moved higher to its 200 day SMA before profit taking while Treasuries continued their move lower. The Shanghai Composite stalled at a lower high after its year end run higher while Emerging Markets continued in consolidation.

Volatility drifted up to the low teens before a drop Friday. This put left it slightly higher and put pressure on equities as they moved lower. All found support Friday following the Non-Farm Payroll and ISM reports and reversed to the upside. This resulted in the SPY and QQQ breaking below the 20 day SMA for the first time since the end of October and the IWM since early November, a good short term reset should prices continue higher next week. 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 nearly 2 year high. It stopped just 1 point away from a new all-time high. Tuesday saw it move lower and it continued Tuesday, breaking the 20 day SMA for the first time since November 1st. It continued lower the rest of the week, ending at a 3 week low and on a 5 day losing streak. The RSI on the daily chart is resetting lower in the bullish zone with the MACD falling but positive.

The weekly chart puts this streak in context as it printed the first red candle in the last 10 weeks. The RSI on this timeframe is pulling back in the bullish zone with the MACD leveling and positive. There is support lower at 466 and 463.50 then 460 and 457, a retest of the Cup and Handle breakout level, before 454 and 451. Resistance higher is at 470 and 471 then 473 and 478.50. Uptrend.

SPY Weekly, $SPY

With the first week of January in the books, equity markets have retrenched, seeing some profit taking into the New Year. Elsewhere look for Gold to pause in its uptrend while Crude Oil pauses in its move lower. The US Dollar Index continues to drift to the downside while US Treasuries pullback in their uptrend, potentially in a reversal. The Shanghai Composite looks to continue the trend lower while Emerging Markets consolidate in a broad range. The Volatility Index looks to remain very low and stable making the path easier for equity markets to the upside.

Their charts continue to look strong on the longer timeframe after a digestion week in long uptrends. On the shorter timeframe the IWM, QQQ and SPY could have reset momentum measures lower in the bullish range and moved price back below the 20 day SMA for the first time in a while. If this was just a momentum reset, then it has gone far enough to watch for a reversal. If it continues then deeper moves may attack the bullishness of the longer term charts. Use this information as you prepare for the coming week and trad’em well.

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