SPY Trends and Influencers February 22, 2020

Last week’s review of the macro market indicators saw heading into the President’s Day holiday weekend, equity markets had another good week with strong moves to the upside. Elsewhere looked for Gold ($GLD) to continue to consolidate in an uptrend while Crude Oil ($USO) reversed higher in consolidation. The US Dollar Index ($DXY) continued to move higher while US Treasuries ($TLT) consolidated in their uptrend.

The Shanghai Composite ($ASHR) looked to continue the short term move higher while Emerging Markets ($EEM) consolidated in a broad range.  The Volatility Index ($VXXB) 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. On the shorter timeframe both the $QQQ and $SPY remained strong while the $IWM continued to struggle to reach the prior high.

The week played out with Gold accelerating to the upside finishing at a 7 year high while Crude Oil pushed slightly higher. The US Dollar had a strong start and made it to 32 month highs before a strong sell off Friday while Treasuries continued higher, retesting the all-time high. The Shanghai Composite raced higher all week while Emerging Markets drifted slightly lower.

Volatility started the week steady and then spiked and ended the week higher. This put pressure on equities late in the week and they responded with a 2 day move lower to end the week. The IWM showed relative strength for the first time in a while as it recovered fully Thursday before dropping with the rest of the market Friday. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week sitting at an all-time high. It held there Tuesday with a small body candle and then printed another tight candle Wednesday that made a new all-time high. Thursday saw a bigger range with a dip that was bought.

And then Friday the dip did not get bought but continued to move lower throughout the day. The daily chart shows the price back near the 20 day SMA. The RSI has rolled over in the bullish zone at a lower high and approaching the mid line. The MACD is also rolling over and crossing down.

The weekly chart shows a retest of the January resistance levels as support holding for now. The RSI on this chart is also turning lower, out of overbought territory, with the MACD leveling at what has been reversal levels. There is resistance above at 335 and 339. Support lower comes at 332 and 328 then 327 and 324.90 before 322. Pullback in Uptrend.

SPY Weekly, $SPY

February options expiration has ended, there is one week left in the month, and equity markets are starting to move lower. Elsewhere look for Gold to continue its strength while Crude Oil creeps higher in consolidation. The US Dollar Index remains in an uptrend despite Friday weakness while US Treasuries seem poised to print record highs. The Shanghai Composite looks to continue the move higher while Emerging Markets move lower in broad consolidation.

The Volatility Index looks to remain at elevated levels, continuing to put pressure on equity markets. Their charts are looking weaker on the shorter timeframe with the exception of the IWM in consolidation. On the longer timeframe the SPY and QQQ still look strong as they work off overbought conditions. Use this information as you prepare for the coming week and trad’em well.

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