SPY Trends and Influencers January 7, 2023

• Posted by Greg Harmon
• on January 7th, 2023

Last week’s review of the macro market indicators saw with 2022 in the books, equity markets had their worst year since 2008 and the 7th worst in the last 96 years. Good Riddance 2022! Elsewhere looked for Gold ($GLD) to potentially build an uptrend while Crude Oil ($USO) moved in a short term uptrend. The US Dollar Index ($DXY) continued in a downtrend while US Treasuries ($TLT) resumed their downtrend. The Shanghai Composite ($ASHR) looked to continue the short term consolidation while Emerging Markets ($EEM) consolidated.

The Volatility Index ($VXX) looked to remain in the normal range making the path easier for equity markets to the upside. The charts of the $SPY and $IWM looked to be in limbo, moving sideways as a potential bottom. On the shorter timeframe the Santa Claus Rally was in jeopardy with 2 days trading left to maintain a slight gain. The $QQQ had been the weakest since mid-December and was retesting the low of the year.

The week played out with Gold pushing to the upside while Crude Oil fell back towards support. The US Dollar probed higher but could not move meaningfully while Treasuries reversed higher, making a higher low. The Shanghai Composite moved back up to long term resistance while Emerging Markets moved back up to the early December highs.

Volatility popped early but fell back all week to end little changed. This put initial pressure on equities and they erased an overnight gain Tuesday, setting up the range for the week. Friday they reversed higher to see the SPY and IWM close up on the week. The QQQ lagged but raced higher Friday afternoon for a gain as well. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week in consolidation at the 38.2% retracement of the post pandemic move higher and in a pullback from a lower high. It continued to consolidate early in the week, and then Friday moved higher, closing one gap from December. It ended at a 3 week high with potential of a establishing a higher low. The daily chart shows the move back over the 20 day SMA with the RSI moving back above the midline and the MACD crossing up, but negative.

The weekly chart shows the move up from consolidation. The RSI on this timeframe is pushing back up to the midline with the MACD level and negative. A close over the November high of 410 would create a higher high to go along with the higher low and establish a reversal. There is resistance at 389 and 391 then 394.50 and 397.50 followed by 400.50 and 403.50. Support lower comes at 386 and 382 then 380 and 376 before 373 and 369. Breaking Consolidation Higher.

SPY Weekly, $SPY

With the first week of 2023 in the books, equity markets showed resilience with a rebound to end the week higher. Elsewhere look for Gold to continue its uptrend while Crude Oil consolidates in a downtrend. The US Dollar Index continues to drift to the downside while US Treasuries are poised to reverse higher in their downtrend. The Shanghai Composite looks to continue in broad consolidation while Emerging Markets establish a short term uptrend.

The Volatility Index looks to remain in the normal range making the path easier for equity markets to the upside. Their charts remain vulnerable to further downside on the longer timeframe. On the shorter timeframe both the IWM and SPY are showing some promise following a Santa Claus Rally while the QQQ is lagging behind. The S&P 500 maintaining over 3839.50 Monday would give a second early year bullish indicator. If that happens traders will look for the trifecta with a positive January to round it out and give another bullish signal. Use this information as you prepare for the coming week and trad’em well.

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