SPY Trends and Influencers July 16, 2022

• Posted by Greg Harmon
• on July 16th, 2022

Last week’s review of the macro market indicators saw with the first week of the 3rd Quarter in the books, equity markets showed strength with a multi-day move to the upside. Elsewhere looked for Gold ($GLD) to continue its pullback while Crude Oil ($USO) continued its short term drop. The US Dollar Index ($DXY) continued to race to the upside while US Treasuries ($TLT) continued their downtrend. The Shanghai Composite ($ASHR) looked to pause in its uptrend while Emerging Markets ($EEM) continued to trend lower.

The Volatility Index ($VXX) looked to remain slightly elevated but moving lower making the path easier for equity markets to the upside. Their charts looked promising but not yet trustworthy on the shorter timeframe. On the longer timeframe the $IWM, the $QQQ and the $SPY all remained in consolidation at key retracement levels.

The week played out with Gold continuing lower towards the 2021 lows while Crude Oil found support at the spring lows and reversed higher Friday. The US Dollar drove to 20 year highs before meeting resistance while Treasuries found support at higher low and turned up. The Shanghai Composite broke its consolidation to the downside while Emerging Markets fell back to 2018 support.

Volatility rose early in the week but then fell back to end the week little changed. This put initial pressure on equities and they responded by starting the week with a 3 day move lower. All gapped down to open Thursday as well before reversing and finishing the week with a 2 day drive higher. This resulted in the SPY, the IWM and the QQQ ending back near Monday’s closing levels and down slightly on the week. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week moving higher and about to test the June bounce high. That never happened as it opened lower Monday and continued to drop through Wednesday. Thursday saw a gap down open get bid higher all day and follow through with a gap up and go on Friday. This still left price short of making a higher high on the daily chart though. The RSI is holding near the midline with the MACD rising but negative. This looks more of consolidation since mid-June than any direction change.

The weekly chart confirms that consolidation and shows it happening around the 38.2% retracement of the post pandemic move higher. The RSI is level in the bearish zone with the MACD level but negative. There is resistance above at 386 and 389.50 then 391.50 and 394.50 before 397.50 and 400.50 then 403.50. Support lower comes at 382 and 380 then 376 and 373 before 369.50 and 364.50. It would take a short term move over 391.50 to start any new short term trend high and then over 418 to attract more interest. Consolidation in Downtrend.

SPY Weekly, $SPY

With the July Options Expiration in the books, equity markets showed some resilience with a rebound from an ugly start to finish only slightly lower as 2nd Quarter earnings season opens. Elsewhere look for Gold to continue its short term downturn while Crude Oil consolidates in an uptrend. The US Dollar Index continues in an uptrend nearing 20 year highs while US Treasuries consolidate in their downtrend. The Shanghai Composite continues a short term downward move while Emerging Markets trend lower.

The Volatility Index looks to remain slightly elevated but moderating taking some of the pressure off equity markets. Their charts have moved to consolidation on both the shorter and longer timeframe, with the indexes exhibiting a very strong correlation. On the longer timeframe the SPY remains the strongest with the least retracement and smallest pullback from the highs with the QQQ next by virtue of its distance above the 200 week SMA and then the IWM. Use this information as you prepare for the coming week and trad’em well.

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