SPY Trends and Influencers February 19, 2022

• Posted by Greg Harmon
• on February 19th, 2022

Last week’s review of the macro market indicators saw heading into February options expiration week, equity markets showed weakness with an ugly finish Thursday and Friday. Elsewhere looked for Gold ($GLD) to continue to rise in consolidation while Crude Oil ($USO) trended higher. The US Dollar Index ($DXY) continued to drift to the upside while US Treasuries ($TLT) pulled back. The Shanghai Composite ($ASHR) looked to continue to consolidate while Emerging Markets ($EEM) continued to trend lower.

The Volatility Index ($VXX) looked to remain elevated and biased higher putting a roadblock in the path of equity markets chances of moving to the upside. Their charts looked 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 was also outperforming with the QQQ looking worse than the SPY.

The week played out with Gold continuing higher while Crude Oil met resistance and pulled back slightly. The US Dollar stalled in the move higher while Treasuries fell to an 11 month low before a bounce. The Shanghai Composite found support and and reversed higher while Emerging Markets met resistance at the falling channel and fell back.

Volatility fell back early in the week but then reversed to end the week elevated and little changed. This put pressure on equities mid-week and they gave up their early week gains to end lower. This resulted in the SPY and QQQ ending back near the January lows with the IWM starting to break its bear flag to the downside. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week pulling back from a short term double top. It found support Monday and then gapped up Tuesday. This brought it back over the 200 day SMA and it gained slightly Wednesday. Thursday saw it move back lower though with follow through to the downside Friday to end just above the January low.

The RSI on the daily chart is moving lower from the midline with the MACD crossed down and negative. There is also a possible Head and Shoulders top that would trigger should it drop below the January lows as the neckline. This would give a price objective to at least 374, but that is getting ahead of ourselves.

The weekly chart shows a close below the 50 week SMA for the first time since June 2020. The RSI on this timeframe is falling to the lower edge of the bullish zone with the MACD dropping but still positive. There is support lower at 430.50 and 428.50 before 425.50 and 423 then 420. Resistance higher sits at 435.50 and 437.50 then 441 and 444 before 444 and 447 then 450. Pullback in Consolidation.

SPY Weekly, $SPY

With February options expiration in the books, equity markets showed further weakness. Elsewhere look for Gold to continue its move higher while Crude Oil consolidates pauses in its uptrend. The US Dollar Index continues to consolidate in a narrow range while US Treasuries pullback. The Shanghai Composite looks to continue the broad consolidation while Emerging Markets consolidate to move lower.

The Volatility Index looks to remain elevated making the path easier for equity markets to the downside. Their charts look weak, especially on the shorter timeframe. On the longer timeframe the QQQ looks the worst with the IWM next and the SPY trying to hold onto consolidation. Use this information as you prepare for the coming week and trad’em well.

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