SPY Trends and Influencers February 24, 2024

• Posted by Greg Harmon
• on February 24th, 2024

Last week, the review of the macro market indicators saw with the February options expiration in the books, equity markets were showing signs of stalling with momentum divergences in the SPY and QQQ. Elsewhere looked for Gold ($GLD) to continue in consolidation while Crude Oil ($USO) consolidated in a broad range. The US Dollar Index ($DXY) continued to drift to the upside over support while US Treasuries ($TLT) continued their downtrend. The Shanghai Composite ($ASHR) looked to re-open and continue the downtrend while Emerging Markets ($EEM) consolidated near long term resistance.

The Volatility Index ($VXX) looked to remain very low and stable making the path easier for equity markets to the upside. Their charts continued to look strong, especially on the longer timeframe. On the shorter timeframe both the $QQQ and $SPY were 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 was teasing to the upside.

The week played out with Gold holding in a tight range while Crude Oil consolidated under resistance. The US Dollar reversed and started a drift to the downside while Treasuries found support and stabilized. The Shanghai Composite reopened and jumped to a higher high while Emerging Markets moved over short term resistance. Volatility started higher in the rising wedge but then reversed to end the week little changed.

This put initial pressure on equities and they responded by starting the week with a 2 day move lower. All found support by Wednesday afternoon and reversed to finish the week higher. This resulted in the SPY and QQQ ending at all-time highs with the IWM stalled at the top of the long term channel. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week stalled at resistance near the all-time high. It gapped down Tuesday and moved lower Wednesday, but only modestly, holding over the 20 day SMA on the daily chart. It then gapped up Thursday to open at a new high and ran higher all day. Friday saw continuation but a stall as it hit 510. The RSI is in the bullish zone with the MACD crossing back up and positive. The Bollinger Bands® continue to point higher on both timeframes.

The weekly chart shows a strong white candle dispensing with the thought of a reversal signal from the Hanging Man last week. The RSI on this timeframe is bullish and moving higher with the MACD positive and rising. There is no resistance above 510 but the 138.2% extension of the retracement of the 2022 pullback at 530 then the Cup and Handle target to 560. Support lower is at 503.50 and 501.50 then 498.50 and 495 before 491 and 488. Uptrend.

SPY Weekly, $SPY

With 1 week left in February, large cap and tech focused equity markets showed resilience with a rebound to new highs after a weak start. Elsewhere look for Gold to continue in consolidation near the highs while Crude Oil consolidates in a broad range. The US Dollar Index now looks to reverse to drift to the downside while US Treasuries pullback in their downtrend. The Shanghai Composite looks to continue the reversal higher while Emerging Markets consolidate.

The Volatility Index looks to remain very low making the path easier for equity markets to the upside. Their charts look strong, especially the SPY and QQQ on the longer timeframe. On the shorter timeframe both the QQQ and SPY may be setting up for a reset as both have momentum divergences. The IWM continues to flirt with a break out. Use this information as you prepare for the coming week and trad’em well.

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