SPY Trends and Influencers August 13, 2022

Last week’s review of the macro market indicators saw with the first week in August over, equity markets continued to show strength on both timeframes and were on the cusp of a full blown reversal. Elsewhere looked for Gold ($GLD) to continue its short term move higher while Crude Oil ($USO) moved lower short term. The US Dollar Index ($DXY) continued in a short term move lower while US Treasuries ($TLT) pulled back in consolidation. The Shanghai Composite ($ASHR) looked to continue in consolidation while Emerging Markets ($EEM) consolidated in the downtrend.

The Volatility Index ($VXX) looked to continue lower in the normal range making the path easier for equity markets to the upside. Their charts looked strong, especially on the longer timeframe. On the shorter timeframe both the $IWM and $SPY were approaching key levels to confirm an intermediate term reversal. The $QQQ continued to move higher after printing a higher high.

The week played out with Gold stalling, unable to create big separation from the 1800 level while Crude Oil bounced to retest prior support as resistance and failed. The US Dollar dropped to a 6 week low before finding support while Treasuries jumped early but fell back to remue the move lower. The Shanghai Composite found support and started higher while Emerging Markets moved up to test the June highs.

Volatility continued to move lower, entering the teens for the first time since early April. This put a wind to the backs of equities and they responded by moving to new highs. This resulted in the SPY and IWM printing their first higher highs of the year on an intermediate term basis. They join the QQQ which continued higher after doing the same the prior week. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week holding in a short term consolidation just below the June highs. It started higher Monday but gave up those gains intraday and continued lower Tuesday, basically staying in consolidation. Wednesday saw a gap up over the June highs and the move continued Friday, ending at the high of the day and week. This was the first intermediate term higher high for the SPY since the all-time high at the start of the year.

The daily chart shows the RSI peeking into overbought territory with the MACD rising and bullish as the Bollinger Bands® point higher. The next important levels on this timeframe are the 200 day SMA currently at 431.84 and then the 61.8% retracement of the drop from the high to the June low, at about 435.

The weekly chart shows a 4th week moving higher and a strong move over the 100 week SMA. The RSI is rising through the midline towards bullish territory with the MACD crossed up but negative. There is resistance at 428.50 and 430 then 435.50 and 437.50 before 441 and 444. Support lower comes at 425.50 and 423 then 420 and 417.50 before 413.50 and 411 then 407.50 and 405.50. Short Term Uptrend.

SPY Weekly, $SPY

Heading into August Options Expiry, equity markets responded to the inflation data with strong moves to the upside and their first intermediate term higher highs since the all-time highs. Elsewhere look for Gold to consolidate while Crude Oil continues the downtrend. The US Dollar Index continues the pullback in the uptrend while US Treasuries consolidate in their downtrend. The Shanghai Composite looks ready for a short term move higher while Emerging Markets may also be reversing higher.

The Volatility Index looks to continue to move lower in the normal range making the path easier for equity markets to the upside. Their charts look strong, especially on the longer timeframe. On the shorter timeframe momentum is starting to get a bit hot so the SPY, IWM and QQQ may be ready for a pause. Use this information as you prepare for the coming week and trad’em well.

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