SPY Trends and Influencers February 8, 2020

Last week’s review of the macro market indicators saw with the first month of the year in the books, equity markets had finally stalled and started to retrace following the long strong run in the 4th Quarter and into January. Elsewhere looked for Gold ($GLD) to continue to move higher while Crude Oil ($USO) tested the lower end of a broad consolidation channel. The US Dollar Index ($DXY) looked better to the downside while US Treasuries ($TLT) headed towards the all-time highs.

The Shanghai Composite ($ASHR) looked to re-open with a bias lower compounded by a week of pent up news while Emerging Markets ($EEM) continued a short term downtrend.  The Volatility Index ($VXXB) looked to remain elevated making the path easier for equity markets to the downside. Their charts also looked weak on the shorter timeframe with the $IWM the ugliest and the $SPY at possible support. Only the $QQQ remained near the 20 day SMA. The longer timeframe looked much less concerning for the QQQ and SPY. The IWM was weaker but at support on this timeframe.

The week played out with Gold meeting resistance and dropping back until a mid week rebound while Crude Oil found support and consolidated all week. The US Dollar found support and pushed to 4 month highs while Treasuries fell back early before a Friday bounce. The Shanghai Composite opened with a big gap down and then drove higher all week while Emerging Markets also found support and rose, but saw profit taking Friday.

Volatility held up Monday but then fell all week. This removed initial pressure on equities and they responded by moving higher. The QQQ made an all-time high Tuesday and the SPY joined it Wednesday with both continuing higher through Thursday. The IWM also ran higher until a pullback Friday. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week following a strong down day and at a 1 month low. It printed an inside day Monday and then ramped higher to make a new all-time high Wednesday. It followed that up with another high Thursday before a small pullback Friday. The last 3 days formed an Evening Star reversal pattern that looks for more downside.

The daily chart shows the RSI in the bullish zone but turning lower at a lower high with the MACD leveling and positive. These suggest the possibility of some downside despite the bullish ranges. The Bollinger Bands® are running higher.

On the weekly chart the move up looks much stronger with the close at a new weekly high. The RSI is rising in the bullish zone with the MACD turning higher. This suggests that any weakness on the daily chart will be short lived. There is no resistance above 334. Support lower comes at 332 and 328 then 327 and 324.90 before 322. Pause in the Uptrend.

SPY Weekly, $SPY

The first week of February ended with some profit taking after a strong week for equities. Elsewhere look for Gold to possibly pause in the uptrend while Crude Oil may pause in the downtrend. The US Dollar Index looks strong and ready for more upside while US Treasuries start a new uptrend. The Shanghai Composite looks to continue the short term move higher while Emerging Markets look like a volatile directionless mess.

The Volatility Index looks to remain at low levels making the path easier for equity markets to the upside. Their charts also look strong on the longer timeframe, especially the QQQ. But on the shorter timeframe both the SPY and IWM are showing some signs of weakness. Use this information as you prepare for the coming week and trad’em well.

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