SPY Trends and Influencers February 15, 2020

Last week’s review of the macro market indicators saw the first week of February ended with some profit taking after a strong week for equities. Elsewhere looked for Gold ($GLD) to possibly pause in the uptrend while Crude Oil ($USO) paused in the downtrend. The US Dollar Index ($DXY) looked strong and ready for more upside while US Treasuries ($TLT) started a new uptrend.

The Shanghai Composite ($ASHR) looked to continue the short term move higher while Emerging Markets ($EEM) looked like a volatile directionless mess.  The Volatility Index ($VIX) looked to remain at low levels making the path easier for equity markets to the upside. Their charts also looked strong on the longer timeframe, especially the $QQQ. But on the shorter timeframe both the $SPY and $IWM were showing some signs of weakness.

The week played out with Gold pausing at the beginning of the week but then resuming the move higher while Crude Oil found support and reversed to the upside. The US Dollar moved higher all week while Treasuries failed to hold a Monday move higher but recovered by week’s end. The Shanghai Composite continued the move higher while Emerging Markets drifted up.

Volatility drifted lower all week. This eased the headwinds against equities and they responded by starting the week with a 2 day move higher. All started to slow by Wednesday but held up through Friday. This resulted in the SPY and QQQ ending back at all-time highs with the IWM approaching the January high. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY had pulled back slightly from an all-time high, after a 4 day run higher, as the week began. It made a statement Monday openings lower but running higher all day to print a bullish Marubozu candle and a new all-time high. It slowed the pace the rest of the week, but managed 3 more new all-time highs, including one to end the week.

The daily chart shows the RSI is flattening as it approaches overbought territory, and what would be another lower high if it stalls here. The thing is this is a 100 point scale so it can only ever get so high, and is just one indicator. The MACD is bullish and rising though with the Bollinger Bands® opening higher. Volume has also started to increase again.

The weekly chart shows a near Marubozu candle for the week. A second strong performance despite all the hype about the corona virus. The RSI is rising and strong with the MACD also moving higher and getting extreme. There is support lower at 334.70 and 332 then 328 and 327 before 324.90. There is no resistance above 338 but a target to 346 on a Measured Move higher. Uptrend.

SPY Weekly, $SPY

Heading into the President’s Day holiday weekend, equity markets had another good week with strong moves to the upside. Elsewhere look for Gold to continue to consolidate in an uptrend while Crude Oil reverses higher in consolidation. The US Dollar Index continues to move higher while US Treasuries consolidate in their uptrend. The Shanghai Composite looks to continue the short term move higher while Emerging Markets consolidate in a broad range.

The Volatility Index looks to remain very low making the path easier for equity markets to the upside. Their charts also look strong, especially on the longer timeframe. On the shorter timeframe both the QQQ and SPY remain strong while the IWM struggles to reach the prior high. Use this information as you prepare for the coming week and trad’em well.

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