SPY Trends and Influencers January 20, 2024

Last week, the review of the macro market indicators saw heading into January options expiration, equity markets were split with strength in the large caps and the tech heavy Nasdaq but small caps continued to tread water. Elsewhere looked for Gold ($GLD) to continue the rebound higher while Crude Oil ($USO) consolidated in a tight range. The US Dollar Index ($DXY) continued to drift to the downside in consolidation while US Treasuries ($TLT) possibly reversed their uptrend. The Shanghai Composite ($ASHR) looked to continue the downtrend while Emerging Markets ($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. The charts of the $SPY and $QQQ looked strong, especially on the longer timeframe. On the shorter timeframe both the QQQ and SPY could succumb to momentum divergences in the short run. The $IWM continued to struggle, stuck in a 21 month range.

The week played out with Gold dropping early in the week but then reversing and closing only slightly lower while Crude Oil continued to hold in the consolidation range. The US Dollar moved slightly higher in consolidation while Treasuries continued the nascent move lower. The Shanghai Composite continued down to a new 44 month low while Emerging Markets fell back to support in the consolidation range.

Volatility remained low and stable but with a small move to the upside early in the week. This put initial pressure on equities and they started the week with a 2 day move lower. All found support by Wednesday and reversed Thursday. This resulted in the SPY and QQQ ending at all-time highs with the IWM continuing to muddle along in consolidation. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week making a new high on the daily chart as it poked above the December top. It pulled back early in the week though with a drop Wednesday below the 20 day SMA. It found support then and moved strongly higher Thursday and Friday, closing the week at its first new all-time high in over 2 years. The daily chart shows the Bollinger Bands® opening as price burst higher. The RSI is strong in the bullish zone with the MACD positive and looking ready to cross up.

The weekly chart shows the break over the December 2021 high in a run that saw 11 of the last 12 weeks as positive. The RSI is deep into the bullish zone with the MACD positive and rising. The target on the current Cup and Handle pattern is 560 and on a Measured Move off the October low is to 490. There is no resistance higher. Support lower sits at 478 and 473.50 then 471 and 470 before 466 and 463.50 then 460. Uptrend.

SPY Weekly, $SPY

With the January options expiration in the books, equity markets showed strength with both the large cap S&P 500 and Nasdaq 100 closing at new all-time highs. Elsewhere look for Gold to continue its pullback in the uptrend while Crude Oil consolidates in a narrow range. The US Dollar Index continues to bounce to the upside while US Treasuries remain in their downtrend. The Shanghai Composite looks to continue its trend lower while Emerging Markets consolidate over long term support.

The Volatility Index looks to remain very low and stable making the path easier for equity markets to the upside. The charts of the SPY and QQQ look strong, especially on the longer timeframe. On the shorter timeframe both the QQQ and SPY have reset on momentum measures and both are very strong. The IWM remains the exception bouncing around in a range that has held it since for almost 2 years. Use this information as you prepare for the coming week and trad’em well.

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