SPY Trends and Influencers March 28, 2020

Last week’s review of the macro market indicators saw, as the calendar turned to spring, there was anything but a refreshing new start in the markets with the worst week for equity markets since 2008. Elsewhere looked for Gold ($GLD) to continue its pullback while Crude Oil ($USO) dropped possibly into the teens. The US Dollar Index ($DXY) continued to shine as it moved to the upside while US Treasuries ($TLT) paused in their uptrend. The Shanghai Composite ($ASHR) looked to possibly reverse the downtrend while Emerging Markets ($EEM) continued to move lower. 

The Volatility Index ($VXXY) looked to remain extreme, keeping the boot on the throat of the equity index ETF’s. Their charts were broken on both the daily and weekly timeframe. On the shorter timeframe the $IWM showed some stability in the short run while the $SPY looked the weakest. The longer timeframe showed the $QQQ the strongest of a weak bunch that was hemorrhaging.

The week played out with Gold pushing sharply higher early then digesting while Crude Oil had a weak bounce and then rolled over finish lower by Friday. The US Dollar sold off to support while Treasuries moved higher Monday and then held there the rest of the week. The Shanghai Composite started moving lower but then gapped up late to end the week higher while Emerging Markets moved higher, giving some gains back Friday.

Volatility gave up a gap up Monday but then reversed a continued sell off to end the week near unchanged. This put initial pressure on equities and they started the week lower. All found strength Tuesday and went on a 3 day binge to the upside before giving some back Friday. This resulted in the SPY, IWM and QQQ showing positive momentum shifts and the first solidly up week since early February. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY entered the week in a bear market below the December 2018 low and looking weak. It moved lower again Monday but then gapped up Tuesday. It continued to move higher through Thursday, touching at a better than 20% move up before settling. It then lost some ground on an inside doji day Friday.

The daily chart shows the RSI still in the bearish zone but with a higher high, and the MACD crossed up but negative. The price also held under the 20 day SMA. A top here would be disappointing. It will also print a Death Cross on Monday with the 50 day SMA crossing down through the 200 day SMA. Despite that it has seen a very strong bounce in a ‘V’ shape.

The weekly chart shows the bounce after under cutting the December 2018 low. It remains below the Bollinger Bands® with the RSI turning up and out of oversold territory. The MACD continues to move lower in negative territory. There is support lower at 250 and 248 then 244 and 240 before 237 and 323 then 228. Resistance higher sits at 256 and 260 then 263.50 and 270 before 273. A strong start but would like to see it break above the 20 day SMA and hold there to get bullish. Bounce in Downtrend.

SPY Weekly, $SPY

With only 2 trading days left in the 1st Quarter, equity markets sit in bear market territory even after what were some new bull market qualifying bounces. Elsewhere look for Gold to continue its consolidation in the uptrend while Crude Oil moves toward 20 year lows. The US Dollar Index continues to whipsaw with a short term downtrend while US Treasuries consolidate in their uptrend. The Shanghai Composite looks to continue the short term drift higher while Emerging Markets continue towards the lows.

The Volatility Index looks to remain extreme making the path filled with craters for equity markets. Their charts look solid in the short term after strong moves higher, but with a large swath of traders anticipating the reversal from a bear market rally anytime. The longer charts showed a sold reversal, and follow through next week could sway a lot of opinions (read money). Use this information as you prepare for the coming week and trad’em well.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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