SPY Trends and Influencers January 8, 2022

Last week’s review of the macro market indicators saw as the books closed on 2021, equity markets posted a good year for tech and large caps while small caps marked time the entire year. Elsewhere looked for Gold ($GLD) to continue its rise in consolidation while Crude Oil ($USL) continued a short term move higher. The US Dollar Index ($DXY) looked to consolidate in the uptrend while US Treasuries ($TLT) churned in a range sideways. The Shanghai Composite ($ASHR) looked to continue broad consolidation while Emerging Markets ($EEM) continued the downtrend.

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 large cap $SPY and tech heavy $QQQ looked strong on the longer timeframe, with the SPY leading the way. On the shorter timeframe both the QQQ and SPY remained near all-time highs but with stalling momentum, suggesting possible short term erosion. The $IWM remained content to hold in the consolidation range that held it almost all of 2021.

The week played out with Gold meeting resistance and dropping back below 1800 while Crude Oil continued the move higher. The US Dollar consolidated in a slightly broader range while Treasuries turned lower. The Shanghai Composite moved lower in consolidation while Emerging Markets drifted slightly lower.

Volatility made lower lows early and then moved back up mid week, but still in the normal range. This put initial pressure on equities mid week and they moved lower. The SPY ran flat after Wednesday with a slight downward drift, while the QQQ and IWM bounced but then gave up the gains. This resulted in the SPY off about 3% and the QQQ back near the December lows. The IWM is back near the bottom of a 12 month range. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week in a bull flag after making a new all-time high 3 days earlier. It moved higher Monday, closing at a new all-time high. Tuesday started higher as well but could not hold up. It followed with a big fall Wednesday and continued to drift lower through Friday. This left the SPY off nearly 3% from the high and at the 50 day SMA. The daily chart shows the RSI pulling back below the midline with the MACD crossed down but positive. The Bollinger Bands® flat on this timeframe.

The weekly chart shows the red candle still well above the 20 week SMA. The RSI on this timeframe is holding in the bullish zone with the MACD flat and positive. There is resistance at 470 and 471 then 473 and 476 before 478.50. Support lower comes at 466 and 463 then 460 and 457 before 454 and 450. Pullback in Uptrend.

SPY Weekly, $SPY

With the first week of 2022 in the books, equity markets showed some short term weakness. Elsewhere look for Gold to consolidate while Crude Oil continues to move higher. The US Dollar Index continues to pause in consolidation in the uptrend while US Treasuries continue a short term downtrend. The Shanghai Composite looks to consolidate while Emerging Markets continue the move lower.

The Volatility Index looks to remain low and in the normal range making the path easier for equity markets to the upside. Their charts continue to show strength on the longer timeframe but with short term weakness. The SPY looks the strongest of the three but in a pullback short term. The QQQ has now joined the IWM in building a consolidation zone, sitting at the bottom of it, while the IWM itself remains in the 11 month range. Use this information as you prepare for the coming week and trad’em well.

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