SPY Trends and Influencers December 31, 2023

• Posted by Greg Harmon
• on December 31st, 2023

Last week, the review of the macro market indicators saw with only 4 trading days left in 2023, equity markets continued to show strength. Elsewhere looked for Gold ($GLD) to continue its move higher while Crude Oil ($USO) extended a short term move to the upside. The US Dollar Index ($DXY) continued to drift to the downside while US Treasuries ($TLT) continued their short term uptrend.

The Shanghai Composite ($ASHR) looked to continue the trend lower while Emerging Markets ($EEM) were back in broad consolidation. The Volatility Index ($VXX) looked to remain very low and stable making the path easier for equity markets to the upside. Their charts continued to look strong, especially on the longer timeframe. On the shorter timeframe there was now some rotation out of adding to the $QQQ and $SPY to putting new money into the $IWM.

The week played out with Gold pushing up to a new all-time high while Crude Oil stalled at a lower high and dropped back. The US Dollar continued lower while Treasuries started to show signs of a stall in their uptrend. The Shanghai Composite found support and bounced while Emerging Markets rose back to retest the December high. Volatility dropped back from the spike higher the prior week.

This removed the pressure on equities and they responded with a 3 day move higher. All ran into profit taking at the end of the week. This resulted in the SPY and QQQ ending slightly off their all-time highs. The IWM cracked long term consolidation and now looks to try to hold that break. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week weathering a pullback and rising toward a retest of the all-time high from December 2021. It continued higher Tuesday through Thursday, stopping just shy of a new high before some profit taking to end the week and 2023. The daily chart shows the RSI is pulling back out of overbought territory with the MACD level and positive. Both are at levels where reversals have happened with the RSI diverging lower.

The weekly chart shows the price action continuing higher along the Bollinger Bands®. The target out of the Cup and Handle is to 570 above. The RSI is rising in the bullish zone with the MACD positive and rising. These suggest the possible correction from the daily chart might just be some chop or sideways action. There is resistance at 478.50. Support lower comes at 473 and 471 then 470 and 466 before 463.50. Uptrend.

SPY Weekly, $SPY

With 2023 in the books, equity markets showed major strength with a strong move higher in the Nasdaq all year that surpassed the large cap S&P 500 move that started in late 2022. Elsewhere look for Gold to continue its uptrend while Crude Oil continues to move lower. The US Dollar Index looks to continue to drift to the downside while US Treasuries stall in their uptrend. The Shanghai Composite looks to bounce in its trend lower while Emerging Markets consolidate in a broad range.

The Volatility Index looks to remain very low and stable making the path easier for equity markets to the upside. Their charts look strong, especially on the longer timeframe. On the shorter timeframe the SPY, the QQQ and the small cap IWM could use a reset on momentum measures as all are extended. The IWM is pulling back with the SPY and QQQ looking vulnerable in the short term. Use this information as you prepare for the coming week and trad’em well.

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