SPY Trends and Influencers February 12, 2022

Last week’s review of the macro market indicators saw the week played out with Gold ($GLD) pulling back and then rebounding while Crude Oil ($USO)consolidated early but then moved to new highs. The US Dollar ($DXY) pulled back from a higher high while Treasuries ($TLT) fell back later in the week to end at 8 month lows. The Shanghai Composite ($ASHR) was closed for the Lunar New Year holidays while Emerging Markets ($EEM) bounced off support but fizzled out the back half of the week.

Volatility ($VXX) fell early but bounced at 20, ending the week lower but slightly elevated. This put pressure on equities midweek and they finished what was a promising week with a 2 day move lower. This resulted in the $SPY, $IWM and $QQQ off of last week’s lows but still in the caution zone.

The week played out with Gold pushing to the upside to resistance while Crude Oil continued higher early before meeting resistance as well and falling back. The US Dollar found support and bounced while Treasuries fell back to 9 month lows. The Shanghai Composite found support and rebounded from last week’s low while Emerging Markets moved back up to falling trend resistance.

Volatility fell back to 1 month lows before a harsh reversal Thursday brought it back to near unchanged on the week. This put late week pressure on equities and they gave up early week gains. The SPY and IWM caught a bid early Friday but succumbed to war fears while the QQQ moved lower all day. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week holding at a higher low after pulling back from a bounce. This was also over the 200 day SMA. It continued to hold early and then jumped higher to the top of the prior bounce Wednesday. Thursday saw it pullback and Friday move lower again, confirming a short term double top and resting under the 200 day SMA again. The daily chart shows the RSI is pulling back after failing to move into the bullish zone with the MACD curling to cross back down and negative.

The weekly chart shows what could be a lower high forming over the 50 week SMA. The RSI on this timeframe is falling towards the lower edge of the bullish zone with the MACD dropping but still positive. There is support at 437.50 and 435.50 then 430.50 and 428.50 before 425.50. Resistance higher sits at 441 and 444 then 447 and 450 before 454 and 457. Pullback.

SPY Weekly, $SPY

Heading into February options expiration week, equity markets showed weakness with an ugly finish Thursday and Friday. Elsewhere look for Gold to continue to rise in consolidation while Crude Oil trends higher. The US Dollar Index continues to drift to the upside while US Treasuries pullback. The Shanghai Composite looks to continue to consolidate while Emerging Markets continue to trend lower.

The Volatility Index looks to remain elevated and biased higher putting a roadblock in the path of equity markets chances of moving to the upside. Their charts look weak, especially on the shorter timeframe, with the QQQ leading the SPY to the downside, but the IWM holding. On the longer timeframe the IWM is also outperforming with the QQQ looking worse than the SPY. Use this information as you prepare for the coming week and trad’em well.

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