SPY Trends and Influencers March 14, 2020

Last week’s review of the macro market indicators saw heading into the second week of March the equity markets remained in distress with volatile moves and was pulling back. Elsewhere looked for Gold ($GLD) to continue higher while Crude Oil ($USO) continued to the downside. The US Dollar Index ($DXY) looked to continue lower as well while US Treasuries ($TLT) made new highs. The Shanghai Composite ($ASHR) continued higher in broad consolidation while Emerging Markets ($EEM) moved lower. 

The Volatility Index ($VXXB) looked to remain at extreme levels keeping the pressure on equity markets. Their charts looked weak, especially on the shorter timeframe. On the longer timeframe both the $QQQ and $SPY had indecision candles, perhaps a reversal, but also a possible continuation lower. The $IWM looked much weaker but at support. .

The week played out with Gold pushing to the upside but failing to hold new highs and dropping back while Crude Oil gapped down and then moved sideways. The US Dollar found support on a pullback and bounced while Treasuries exploded to new high prices and all time low yields Monday and then retreated to end the week lower. The Shanghai Composite gapped down and settled under its 200 day SMA while Emerging Markets ran lower before a bounce to end the week.

Volatility continued the historic run higher, topping and ending the week over 70. This continued to put pressure on equities and they responded by starting the week with a large gap down. All continued to have wide swings each day. This resulted in the SPY and QQQ dropping more than 20% from their highs into bear market territory and the IWM falling more than 30%. For the SPY this was the fastest move from an all-time high to a drop of over 20% in history. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week 12% off of its high after a wild week. It gapped down Monday and then bounced back Tuesday. Wednesday saw another strong move lower dipping below a 20% pullback before recovering slightly. Thursday left no doubt of a Bear Market move with another gap down that ran to close at the low, off over 26%. Friday saw a massive rally over the last 30 minutes bring the SPY to just over 20% off it high.

The daily chart shows the massive daily volume on this move lower with the price now extended well below the 200 day SMA. Of interest, there still has not been a Death Cross in the chart. The RSI is holding near oversold with the MACD dropping and at levels not seen in over 30 years (I do not have data prior to that).  It was the first week since 1929 that every day saw a move of over 4% in the Index (HT Ryan Detrick of LPL Financial).

The weekly chart printed a Spinning Top candle with a 40 handle range. This signals indecision and with these wild daily ranges that makes sense. It is also well outside of the Bollinger Bands®. The RSI is now oversold with the MACD falling but not yet negative. There is support lower at 263.50 and 260 then 256 and 250 before 248 and 244 then 240 and 234. Resistance above sits at 273 and 281 then 284 and 288 before 294. Downtrend.

SPY Weekly, $SPY

After a week of previously unseen price action that saw wild daily swings and huge volume the equity markets entered a Bear Market. Elsewhere look for Gold to continue its pullback while Crude Oil pauses in its drop. The US Dollar Index looks to continue to move back higher while US Treasuries pullback in their uptrend. The Shanghai Composite looks to consolidate under resistance while Emerging Markets move lower.

The Volatility Index looks to remain extreme making the road for equities bumpy and wild. The Equity Index ETF charts are damaged with all holding below their 200 day SMA’s. The longer timeframes are now also favoring the bearish path. The lone bright spot was a big rally in the last 30 minutes to end an historic week. Use this information as you prepare for the coming week and trad’em well.

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