SPY Trends and Influencers January 29, 2022

Last week’s review of the macro market indicators saw with January options expiration in the books, equity markets were off to an ugly start for 2022. Elsewhere looked for Gold ($GLD) to continue higher in consolidation while Crude Oil ($USL) continued the uptrend. The US Dollar Index ($DXY) continued to drift to the upside in consolidation while US Treasuries ($TLT) consolidated. The Shanghai Composite ($ASHR) looked to consolidate as well while Emerging Markets ($EEM) continued the downtrend.

The Volatility Index ($VXX) looked to remain elevated, possibly moving higher, making the path easier for equity markets to the downside. Their charts looked weak and trending lower on the shorter timeframe. On the longer timeframe both the $QQQ and $SPY were shifting into troubled looks. The $IWM was now in a downtrend.

The week played out with Gold stalling at a lower high and dropped back while Crude Oil dropped monday but then rose to new highs by the end of the week. The US Dollar quickened the pace to the upside reaching 18 month highs while Treasuries settled into a rane at the lows. The Shanghai Composite broke the top of the consolidation range to the downside while Emerging Markets continued lower to the bottom of a falling channel.

Volatility rose slightly and showed signs of topping. The equity markets saw early weakness rebound Monday and then wide chop the rest of the week. The IWM was the exception making a lower low. This resulted in the SPY touching back at the October low and the QQQ undercutting that October level before ending the week slightly higher. 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 200 day SMA for the first time since June 2020. It gapped down Monday and continued to drop intraday reaching over a 12% drop from the top to touch the October low before reversing and closing the gap. It continued to bounce around in a wide range under the 200 day SMA for the rest of the week.

It ended Friday less than half a point under the 200 day SMA and up on the week. The daily chart shows the bear flag or consolidation building. The RSI is racing higher out of oversold territory while the MACD is kinking higher but negative at an 18 month low. This is a good spot for a reversal, but the evidence is far from overwhelming that it will be.

The weekly chart shows a Hammer candle, a possible reversal signal if confirmed next week. This is at the 50 week SMA and the lower of the Bollinger Bands®. The RSI on this timeframe is turning back higher and has remained in the bullish zone. The MACD is dropping but positive. There is support lower at 441 and 437.50 then 435.50 and 430.50 before 428.50 and 425.50. Resistance higher comes at 444 and 447 then 450 and 454 before 457. Consolidation in the Pullback.

SPY Weekly, $SPY

With just one trading day left in January traders are getting excited to turn the page on an ugly month for equities. Elsewhere look for Gold to continue in consolidation while Crude Oil continues to move higher. The US Dollar Index continues in an uptrend as well while US Treasuries consolidate. The Shanghai Composite is moving lower in consolidation while Emerging Markets remain in a downtrend.

The Volatility Index is elevated but moving lower easing the pressure on equity markets. Their charts are mixed with the SPY and QQQ showing consolidation in the pullback in the short timeframe and potential reversal candles on the longer timeframe. The IWM is in a downtrend on the shorter frame with indecision on the longer timeframe. Use this information as you prepare for the coming week and trad’em well.

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