SPY Trends and Influencers December 17, 2022

• Posted by Greg Harmon
• on December 17th, 2022

Last week’s review of the macro market indicators saw heading into December options expiration, equity markets had rolled again, threatening to reverse their short term uptrends. Elsewhere looked for Gold ($GLD) to continue its short term uptrend while Crude Oil ($USO) continued the downtrend. The US Dollar Index ($DXY) had found short term support in its downtrend while the US Treasuries ($TLT) short term uptrend had stalled. The Shanghai Composite ($ASHR) looked to continue its short term move higher while Emerging Markets ($EEM) consolidated in their move higher.

The Volatility Index ($VXX) remained in the normal zone but higher making the path slightly more difficult for equity markets to the upside. Their charts looked stronger on the longer timeframe, especially the $SPY and $QQQ, but with bits of weakness showing up. On the shorter timeframe the $IWM was leading a reversal lower while the QQQ and SPY held over support for now.

The week played out with Gold meeting resistance early in the week and dropping back while Crude Oil rallied early but met resistance at a lower high and reversed. The US Dollar made a new 6 month low before a late week bounce while Treasuries continued to consolidate. The Shanghai Composite spent the week cemented to its 200 day SMA while Emerging Markets pulled back.

Volatility held in a tight range to end little changed. The stability allowed for the reaction to the CPI print and FOMC meeting to drive equities. They initially jumped following the CPI print but then sold off and continued following the Fed meeting and press conference. This resulted in the SPY and QQQ breaking support and making 1 month lows with the IWM dropping to a 6 week low. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week at support after a pullback from a 3 month high. It moved higher Monday and then had a gap up open Tuesday at what would have been a new high and through the falling trend resistance since the all-time high. But then it sold off all day closing the gap before a bounce.

It moved lower Wednesday and continued the rest of the week breaking short term support Thursday and closing the gap from November 10 on Friday as it ended below the 50 day SMA. This however left two gaps open to the upside on the daily chart. The RSI is at the lower edge of the bullish zone with the MACD dropping but positive.

The weekly chart shows the second week lower after the touch at the falling trendline. The RSI is turning back after a brief move over the midline while the MACD is leveling and negative. There is support lower at 382 and 380 then 376 and 373 before 369 and 364.50. Resistance higher sits at 386 and 389 then 391.50 and 394.50 before 397.50 and 400.50 then 403.50. Intermediate Term Downtrend Resumes.

SPY Weekly, $SPY

With the last FOMC meeting and Quad Witching done for the year, equity markets have resumed their moves lower. Elsewhere look for Gold to consolidate in the uptrend while Crude Oil moves lower. The US Dollar Index continues the trend lower while US Treasuries stall in their short term uptrend. The Shanghai Composite looks to continue the short term uptrend while Emerging Markets consolidate in their short term move higher.

The Volatility Index looks to remain in the normal range making the path easier for equity markets to the upside. It also makes the Indexes more vulnerable to news based moves like we saw this week following the CPI report and FOMC meeting. Their charts showing that weakness from the short term view leaking into the longer term view now and the weekly pictures also roll over. On the shorter timeframe both the QQQ and IWM look vulnerable to a retest of the October low. The SPY looks slightly better, but only because it has further to go to retest it. Use this information as you prepare for the coming week and trad’em well.

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