SPY Trends and Influencers February 10, 2018

A weekly excerpt from the Macro Review analysis sent to subscribers on 10 markets and two timeframes.

Last week’s review of the macro market indicators noted as February started equities had experienced their first pullback of more than 3% since what felt like forever, with technicals suggesting the pain may not be over yet. Elsewhere looked for Gold ($GLD) to consolidate in its uptrend while Crude Oil ($USO) paused in its uptrend as well.

The US Dollar Index ($DXY) downtrend had hit new lows but was ready for a bounce while US Treasuries ($TLT) were accelerating lower. The Shanghai Composite ($ASHR) and Emerging Markets ($EEM) were pulling back in their uptrends. Volatility looked to continue higher keeping the pressure on the equity index ETF’s $SPY, $IWM and $QQQ. Their charts showed pauses in the uptrend in the longer timeframe with pullbacks in the shorter one ready to continue.

The week played out with Gold finding resistance and pulling back while Crude Oil also met sellers and dropped lower. The US Dollar did bounce showing strength all week while Treasuries tried to move higher but but failed and drifted. The Shanghai Composite pulled back hard to a lower low while Emerging Markets dropped to retest long term support.

Volatility ballooned, touching over 50, pushing the bias lower for equities. The Equity Index ETF’s felt the pain and continued lower on the week, bouncing early and then falling back to lower lows. The SPY, IWM and QQQ all made lows more than 10% below the highs from late January, correction territory, before a strong bounce to end the week late Friday. What does this mean for the coming week? Lets look at some charts.

SPY Daily, $SPY

The SPY had finished below its 20 day SMA for the first time since November 15th as it entered the week. It started the week with an explosive move lower through the 50 day SMA for the first time since August Monday and closed just over its 100 day SMA. This left it well outside of the Bollinger Bands® and after a gap down open Tuesday it retraced, printing a Piercing Line. This is a possible reversal signal, but Wednesday did not confirm as it closed lower and continued down Thursday closing below the 100 day SMA for the first time since November 2016.

Friday saw another move lower to test the 200 day SMA for the first time since the 2016 election. That is a lot of SMA’s crossed in one week. It printed a doji Hammer Friday as price bounced strongly at the end of the day, suggesting the bottom might be in if confirmed Monday. All told that would be a 38.2% retracement of the move higher since the Presidential election and an 11% correction. The daily chart shows the RSI hit oversold levels early in the week and then retested them before a bounce Friday, while the MACD continues to move lower and is negative.

The weekly chart shows the RSI now has pulled back from being deeply overbought to the mid line and the MACD has just crossed down. Volume on this timeframe suggests a major liquidation occurred. There is support lower at 260 and 257 then 256 and 254 before 252.50 and 250. Resistance overhead sits at 262.50 and 265.50 then 267 and 269 before 272 and 275. Possible End to Pullback in Uptrend.

SPY Weekly, $SPY

Heading into February Options Expiration the equity market has finally had their first 3%, 5% and 10% pullbacks in a very long time, all in one week. Elsewhere look for Gold to continue lower while Crude Oil also continues to pullback. The US Dollar Index bounce looks to continue while US Treasuries are biased continue lower. The Shanghai Composite and Emerging Markets are both biased to the downside, but with Emerging Markets at long term support.

Volatility looks to remain elevated keeping the bias lower for the equity index ETF’s SPY, IWM and QQQ. Their charts incurred major damage in the shorter time frame but all ending with potential reversal candles, awaiting confirmation Monday. The longer timeframes all see major rests to momentum indications and stopped short of any trend change. Use this information as you prepare for the coming week and trad’em well.

Join the Premium Users and you can view the Full Version with 20 detailed charts and analysis: Macro Week in Review/Preview February 9, 2018

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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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