SPY Trends and Influencers January 28, 2023

Last week’s review of the macro market indicators saw with January options expiration in the books, equity markets showed resilience overcoming a strong move lower midweek. Elsewhere looked for Gold ($GLD) to continue its uptrend while Crude Oil ($USO) consolidated in a tight range. The US Dollar Index ($DXY) continued to drift to the downside while US Treasuries ($TLT) were trying to mount a short term uptrend. The Shanghai Composite ($ASHR) was in a short term uptrend while Emerging Markets ($EEM) continued their trend higher.

The Volatility Index ($EEM) looked to remain stable in the normal range making the path easier for equity markets to the upside. Their charts also looked strong on the shorter timeframe with the $SPY, the $QQQ and the $IWM all approaching resistance. On the longer timeframe both the SPY and the QQQ were nearing a long term trend breakout with the IWM near a 5 month breakout.

The week played out with Gold consolidating over support while Crude Oil dipped early but held and stayed in a tight range. The US Dollar continued its slow leak lower while Treasuries stalled and held in a range. The Shanghai Composite was closed for Lunar New Year celebrations while Emerging Markets continued up to 7 month highs. Volatility pressed down to new 52 week lows.

This put a wind at the backs of equities and they responded by starting the week with a 2 day move lower. All dipped Wednesday before recovering intraday and then continued to the upside to finish the week higher. This resulted in the SPY and QQQ ending over the year long down trending resistance with the IWM continuing to press on 2 month resistance. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week at its 200 day SMA as it confirmed a short term Morning Star reversal. It continued higher Monday, breaking over the downward trending resistance that has held it since the beginning of the move lower in January 2022. It held over Tuesday and then opened down Wednesday before reversing in the afternoon and recovering. Thursday and Friday then resumed the move higher along the open Bollinger Bands®. It ended at an 8 week high but still short of making a higher high and confirming a trend reversal. The daily chart shows the RSI rising in the bullish zone with the MACD positive and rising.

The weekly chart shows the indecision candle from last week resolving to the upside and a close over the 50 week SMA. The RSI on this timeframe is lifting off the midline with the MACD about to turn positive. There is resistance at 407.50 and 411 then 413.50 and 417.50 before 420 and 423. It will take a close over 411 to confirm an intermediate trend change. Support lower comes at 405.50 and 403.50 then 400.50 before 397.50 and 394.50 then 391. Short Term Uptrend.

SPY Weekly, $SPY

With just 2 trading days left in January, equity markets are showing strength as they move higher. And with the Santa Claus Rally and 1st Five Days of January both positive is seems a lock that there will also be a Positive January to have all 3 indicators align to set up a positive performance indication for all of 2023. Elsewhere look for Gold to continue its uptrend while Crude Oil consolidates in a tight range. The US Dollar Index continues to drift to the downside while US Treasuries consolidate the bounce in their downtrend. The Shanghai Composite comes back from holiday looking to continue the move higher while Emerging Markets continue to enjoy an uptrend.

The Volatility Index looks to remain normal and stable making the path easier for equity markets to the upside. Their charts look strong on both timeframes. On the shorter timeframe both the QQQ and IWM are making higher highs, with the SPY and QQQ now over their respective 200 day SMA’s. On the longer timeframe the SPY and QQQ are also over falling trend resistance that has held them all of 2022. All are starting to look a lot more bullish. Use this information as you prepare for the coming week and trad’em well.

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