SPY Trends and Influencers January 27, 2024

• Posted by Greg Harmon
• on January 27th, 2024

Last week, the review of the macro market indicators saw with the January options expiration in the books, equity markets showed strength with both the large cap S&P 500 and Nasdaq 100 closing at new all-time highs. Elsewhere looked for Gold ($GLD) to continue its pullback in the uptrend while Crude Oil ($USO) consolidated in a narrow range. The US Dollar Index ($DXY) continued to bounce to the upside while US Treasuries ($TLT) remained in their downtrend. The Shanghai Composite ($ASHR) looked to continue its trend lower while Emerging Markets ($EEM) consolidated over long term support.

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 had reset momentum measures and both were very strong. The $IWM remained the exception bouncing around in a range that has held it for almost 2 years.

The week played out with Gold continuing lower, but slowing the pace, while Crude Oil broke the consolidation range to the upside. The US Dollar held in a tight range while Treasuries slowed their pace on the move lower as well. The Shanghai Composite soared following a Government stimulus package while Emerging Markets held in a tight range in consolidation. Volatility held on the lower edge of the teens, ending little changed.

This continued the tailwind for equities and they started the week moving higher. The IWM settled into a range after Monday, while the QQQ stalled after Wednesday with the SPY continuing higher all week. This resulted in the SPY ending at an all-time highs with the QQQ just off its Wednesday high print. The IWM remained in the 18 month consolidation. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week at an all-time high. It continued to move higher all week, printing new highs Monday through Thursday, before profit taking Friday afternoon saw the streak end. The daily chart shows the march higher along the open Bollinger Bands® after breaking short term resistance. The RSI is edging into overbought territory in the bullish zone with the MACD crossed back up, rising and positive.

The weekly chart has now printed a Three Advancing White Soldiers pattern showing continuation. There is the 161.8% Fibonacci extension of the retracement of the 2023 pullback nearby at 490.50 and 200% extension at 509.67. It also has a target on a Cup and Handle pattern to 560. The RSI on this timeframe is strong in the bullish zone with the MACD positive and rising. There is no resistance above 488. Support lower comes at 478 and 473.50 then 470 and 466 before 463.50 and 460. Uptrend.

SPY Weekly, $SPY

With just 3 trading days left in January, equity markets look ready to finish the month higher. Elsewhere look for Gold to continue its pullback while Crude Oil reverses higher. The US Dollar Index looks to drift sideways in consolidation while US Treasuries continue their downtrend. The Shanghai Composite looks to extend the bounce to the upside while Emerging Markets continue in consolidation.

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 end up rolling over to reset momentum measures as both are extended. If that happens it might be time for the IWM to finally take the lead and test the 20 month channel consolidation. Use this information as you prepare for the coming week and trad’em well.

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