SPY Trends and Influencers January 4, 2020

• Posted by Greg Harmon
• on January 4th, 2020

Last week’s review of the macro market indicators saw with just 2 trading days left in the decade, equity markets were showing signs of tiring after a long run higher. Elsewhere looked for Gold ($GLD) to continue its move higher while Crude Oil ($USO) joined it on the path higher. The US Dollar Index ($DXY) looked to continue to the downside while US Treasuries ($TLT) consolidated in their downtrend.

The Shanghai Composite ($ASHR) looked to continue to consolidate while Emerging Markets ($EEM) moved higher over long term resistance. The Volatility Index ($VXXB) looked to remain very low making the path easier for equity markets to the upside. Their charts looked strong on the longer timeframe, but were starting to look extended on the shorter timeframe. Both the $QQQ and $SPY could use a reset on momentum measures and the $IWM was already digesting its move.

The week played out with Gold driving to a new 4 month high while Crude Oil also moved up, meeting resistance at the September high. The US Dollar found support as the New Year started and bounced while Treasuries rose out of consolidation late in the week. The Shanghai Composite rose out of consolidation to 8 month highs while Emerging Markets made a major long term break out but could not hold the gain.

Volatility remained tame despite a jump Friday. This put late pressure on equities. They started the week pulling back but all found support Tuesday to end the year stronger. The SPY and QQQ went on to all-time highs into the New Year with the IWM testing recent highs, before all gave back some gains on headlines Friday. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY had ended the Christmas week with a failed attempt to make a new closing high, but only pennies below the Thursday high close. It continued lower Monday and then Tuesday opened lower as well. But it rallied all day and closed strong to end the year. Thursday it gapped up and ran to start the year with a new all-time high close but then gave back some ground Friday. The week was spent in a tight range around the all-time high though. The RSI on the daily chart looks to be resetting lower in the bullish zone with the MACD flat as price moves back toward the 20 day SMA.

The weekly chart shows a doji marking indecision. This comes after 5 straight up weeks. Also note the prior doji came after 6 weeks traveling higher. Indecision does not mean reversal. The RSI is pulling back from overbought on this timeframe with the MACD rising and near the early 2018 peak. The target of 330 out of the ascending triangle remains only slightly above with resistance at 324.90 in between. Support lower comes at 322 and 320 then 319 and 315.50 before 313.50. Possible Pause in Uptrend.

SPY Weekly, $SPY

The decade has ended and now a new one has begun, and equity markets look extended as it does. Elsewhere look for Gold to continue higher while Crude Oil moves to the upside. The US Dollar Index continues to look better to move lower while US Treasuries pause in their downtrend. The Shanghai Composite looks poised to continue higher along with Emerging Markets which are breaking above long term resistance.

The Volatility Index looks to remain low making the path easier for equity markets to the upside. Their charts look strong on the longer timeframe, but are starting to get extended. On the shorter timeframe the IWM is retracing while the SPY looks like it might pause with the QQQ continuing to race higher but the most extended. Use this information as you prepare for the coming week and trad’em well.

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