SPY Trends and Influencers January 13, 2024

Last week, the review of the macro market indicators saw with the first week of January in the books, equity markets had retrenched, seeing some profit taking into the New Year. Elsewhere looked for Gold ($GLD) to pause in its uptrend while Crude Oil ($USO) paused in its move lower. The US Dollar Index ($DXY) continued to drift to the downside while US Treasuries ($TLT) pulled back in their uptrend, potentially in a reversal. The Shanghai Composite ($ASHR) looked to continue the trend lower while Emerging Markets ($EEM) consolidated in a broad range. 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 on the longer timeframe after a digestion week in long uptrends. On the shorter timeframe the $IWM, $QQQ and $SPY could reset momentum measures lower in the bullish range and move price back below the 20 day SMA for the first time in a while. If this was just a momentum reset, then it had gone far enough to watch for a reversal. If it continued then deeper moves could attack the bullishness of the longer term charts.

The week played out with Gold moving lower all week until a spike higher Friday retraced that and more while Crude Oil consolidated in the low 70’s. The US Dollar drifted sideways all week while Treasuries found support just under the 200 day SMA. The Shanghai Composite continued lower ending at a level not seen since late May 2020 while Emerging Markets dipped early but recovered to end little changed.

Volatility continued to fall back to end the week at the lows of the year. This took pressure off equities and they responded by starting the week with a 3 day move higher. They stalled Thursday and held there Friday. This resulted in the SPY and QQQ ending near all-time highs but with the IWM continuing to lag 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 below the 20 day SMA after pulling back from a late December top. It started higher Monday, breaking back above the 20 day SMA and continued higher through Wednesday. Thursday saw a push to the upside fail but then recovered to end only slightly lower and Friday had a similar result. This left it just below the all-time high and the at the December high. The RSI is holding in the bullish zone but at what looks like a possible lower high while the MACD is flat after resetting lower in the bullish zone.

The weekly chart shows a different picture though with a strong white candle recovering back to the December high. The RSI on this timeframe is also strong in the bullish zone with the MACD rising and positive. The strong bullish feel on the weekly suggests any weakness on the daily may be short lived. There is resistance at 478. Support lower sits at 473.50 and 471 then 470 and 466 before 463.50 and 460. Uptrend.

SPY Weekly, $SPY

Heading into January options expiration, equity markets are split with strength in the large caps and tech heavy Nasdaq but small caps continuing to tread water. Elsewhere look for Gold to continue the rebound higher while Crude Oil consolidates in a tight range. The US Dollar Index continues to drift to the downside in consolidation while US Treasuries possibly reverse their uptrend. The Shanghai Composite looks to continue the downtrend while Emerging Markets consolidate in a broad range.

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 could succumb to momentum divergences in the short run. The IWM continues to struggle, stuck in a 21 month range. Use this information as you prepare for the coming week and trad’em well.

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