SPY Trends and Influencers February 17, 2024

Last week, the review of the macro market indicators saw heading into February options expiration, equity markets continued to show strength, especially on the large cap and tech indexes. Elsewhere looked for Gold ($GLD) to continue in consolidation while Crude Oil ($USO) consolidated in a broad range. The US Dollar Index ($DXY) continued to drift to the upside in consolidation while US Treasuries ($TLT) pulled back in their downtrend. The Shanghai Stock Exchange ($ASHR) was closed all week for the Lunar New Year holiday while Emerging Markets ($EEM) consolidated under resistance.

The Volatility Index ($VXX) looked to remain very low making the path easier for equity markets to the upside. Their charts also looked strong, especially on the longer timeframe where the $SPY and $QQQ were up 14 of the last 15 weeks and 5 in a row. On the shorter timeframe the QQQ and SPY closed at record highs and looked strong. The $IWM was trying to break higher on the short term basis and make a run at the top of the 22 month channel.

The week played out with Gold pulling back to support in consolidation then bouncing while Crude Oil continued to hold in consolidation in a tight range. The US Dollar moved over short term resistance in consolidation while Treasuries found support and consolidated. The Shanghai Composite was closed while Emerging Markets poked over resistance.

Volatility spiked early in the week but fell back mid week to end slightly higher. This put initial pressure on equities and they started the week with a 2 day move lower. All found support Tuesday and reversed to move higher the next 2 days. Friday saw another dip early get bought. This resulted in the SPY slightly higher and QQQ slightly lower on the week with the IWM continuing its break higher. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week at an all-time high. It held there Monday but with an Evening Star doji on the daily chart. That confirmed as a reversal with a gap down Tuesday following the CPI report. But it held over the 20 day SMA and moved higher through Thursday, filling the gap and closing at a new all-time high. Friday saw an inside day as options hedging and the big round number theory played a role. The RSI continues to hold in the bullish zone but making lower highs. The MACD is flat though avoiding a cross down and positive and the Bollinger Bands® remain pointing higher.

The weekly chart shows a Hanging Man candle, breaking the 5 week winning streak. The RSI on this timeframe is into overbought territory with the MACD rising and positive. The Bollinger Bands on this timeframe are also shifted higher. There is resistance at 501.50 and 503.50 then the 138.2% extension of the retracement of the 2022 pullback to 530 and the Cup and Handle target to 560. Support lower comes at 498.50 and 495 then 491.50 and 488 before 478. Uptrend.

SPY Weekly, $SPY

With the February options expiration in the books, equity markets are showing signs of stalling with momentum divergences in the SPY and QQQ. Elsewhere look for Gold to continue in consolidation while Crude Oil consolidates in a broad range. The US Dollar Index continues to drift to the upside over support while US Treasuries continue their downtrend. The Shanghai Composite looks to re-open and continue the downtrend while Emerging Markets consolidate near long term resistance.

The Volatility Index looks to remain very low and stable making the path easier for equity markets to the upside. Their charts continue to look strong, especially on the longer timeframe. On the shorter timeframe both the QQQ and SPY seeing a negative divergence on momentum measures which could resolve with a pullback. If that happens it might be time for the IWM to take the lead, and it has been teasing to the upside. Use this information as you prepare for the coming week and trad’em well.

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