SPY Trends and Influencers February 3, 2024

• Posted by Greg Harmon
• on February 3rd, 2024

Last week, the review of the macro market indicators saw with just 3 trading days left in January, equity markets looked ready to finish the month higher. Elsewhere looked for Gold ($GLD) to continue its pullback while Crude Oil ($USO) reversed higher. The US Dollar Index ($DXY) looked to drift sideways in consolidation while US Treasuries ($TLT) continued their downtrend. The Shanghai Composite ($ASHR) looked to extend the bounce to the upside while Emerging Markets ($EEM) continued in consolidation.

The Volatility Index ($VXX) looked to remain very low and stable making the path easier for equity markets to the upside. The charts of the $SPY and $QQQ looked strong, especially on the longer timeframe. On the shorter timeframe both the QQQ and SPY could end up rolling over to reset momentum measures as both were extended. If that happens it could be time for the $IWM to finally take the lead and test the 20 month channel consolidation.

The week played out with Gold reversing and pushing to the upside near the all-time high before a Friday sell off while Crude Oil hit resistance and fell back. The US Dollar continued the sideways drift until a push higher toward resistance Friday while Treasuries led a 4 day bounce higher that reversed Friday. The Shanghai Composite met resistance and reversed lower while Emerging Markets moved lower in consolidation. The Volatility Index continued to remain low and in a narrow range. This continued to place a tailwind at equities backs, but in a pre-FOMC market with no news, this led to early chop.

That changed after the FOMC press conference Wednesday reacted with a strong move lower. Thursday all was well again and equities pushed back to the highs of the week. All dropped Friday on the strong Non-Farm Payroll report but quickly reversed after regular trading hours opened. This resulted in the SPY and QQQ closing at a record high. The IWM continued in its own world, moving mainly sideways in consolidation. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week just off the all-time high. It made another record close Monday before a 2 day pullback, mostly in response to the FOMC press conference. That drop was erased Thursday and it continued higher Friday to end the week at the 7th record high of the year. The daily chart shows the Bollinger Bands® open to the upside as price rises along the top of them. The RSI is rising in the bullish zone with the MACD positive and rising.

The weekly chart looks even better as price continues toward the Cup and Handle target at 560. The 13th positive candle in the last 14 weeks is also rising along the upper Bollinger Band on this timeframe. There is no resistance higher but the 138.2% extension of the retracement of the 2022 pullback is at 526 above. Support lower is at 491.50 and 488 then 478 and 473.50 before 470. Uptrend.

SPY Weekly, $SPY

Heading into February Punxsutawney Phil is calling for the weather to get warmer and equity markets are looking downright hot. Elsewhere look for Gold to continue the short term consolidation while Crude Oil falls back into consolidation. The US Dollar Index continues to drift to the upside in consolidation while US Treasuries consolidate after a pullback. The Shanghai Composite looks to continue the downtrend while Emerging Markets consolidate over support.

The Volatility Index looks to remain very low and stable making the path easier for equity markets to the upside. The charts of the SPY and QQQ look strong, especially on the longer timeframe. On the shorter timeframe both the QQQ and SPY have reset on momentum measures are now also better to the upside. The IWM continues to blaze its own trail, remaining in the 22 month channel. Use this information as you prepare for the coming week and trad’em well.

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