SPY Trends and Influencers June 11, 2022

Last week’s review of the macro market indicators saw heading into the second week of June and the last week before the next FOMC meeting, equity markets took a breather, digesting the strong finish to the prior week. Elsewhere looked for Gold ($GLD) to pause in its short term move higher while Crude Oil ($USO) drove towards a retest of the March highs. The US Dollar Index ($DXY) continued to hold just below resistance while US Treasuries ($TLT) moved lower. The Shanghai Composite ($ASHR) looked to continue the short term move higher while Emerging Markets ($EEM) continued their downtrend.

The Volatility Index ($VXX) looked to remain slightly elevated making the path somewhat easier for equity markets to the upside. Their charts failed to follow through on the prior week’s strength though, leaving them in consolidation without making a higher high and lacking momentum on the shorter timeframe. On the longer timeframe it was too soon to tell if the $IWM, the $QQQ and the $SPY were reversing or setting up for the next leg lower. This suggested more uncertainty and sideways consolidation.

The week played out with Gold holding near unchanged until a Thursday dip and then Friday rip higher while Crude Oil continued the move higher. The US Dollar broke to the upside while Treasuries moved back to the May lows. The Shanghai Composite moved up to the early April highs while Emerging Markets fell out of short term consolidation and heading back to the May lows.

The Volatility Index drifted lower early in the week before a sharp reversal Thursday and continuation Friday. This put pressure on equities late in the week and the fell precipitously following a 3 day consolidation. All ended the week with a big gap down and run lower. The SPY and the QQQ are now back at the May lows with the IWM hovering just above its May low consolidation zone. 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 after a bounce off the May lows. It held there in a tight range through Wednesday, before a strong move lower Thursday. This took it below the 20 day SMA again and back near the round number 400. Friday then saw a gap down open and strong move lower to close back at the May low closes. The daily chart shows the RSI is dropping back in the bearish zone with the MACD rolling over to cross down and negative.

The weekly chart shows a full retracement of the strong move higher 2 weeks ago and a drop under the 100 week SMA. The RSI on this timeframe is dropping in the bearish zone as well with the MACD negative and working lower. There is support lower at 389.50 and 386 then 380 and 376 before 373. Resistance higher sits at 394.50 and 397.50 then 400.50 and 403.50 before 405.50 and 407.50. Downtrend.

SPY Weekly, $SPY

Heading into the June options expiration week and FOMC meeting, equity markets have resumed their blood bath moves to the downside and are testing the May lows. Elsewhere look for Gold to continue its consolidation in the uptrend while Crude Oil drives up to new highs. The US Dollar Index continues its move to the upside while US Treasuries continue their downtrend. The Shanghai Composite looks to continue to move higher while Emerging Markets resume the move to the downside.

The Volatility Index looks to remain elevated making the path easier for equity markets to the downside. And the Dollar Index resuming the uptrend will reinforce this. Their charts also look ugly, especially on the longer timeframe with reversal patterns ending the week with prices back near the lows. They are also synched up and moving in unison now. On the shorter timeframe both the QQQ and SPY are back at May lows but with momentum building. The IWM is not far behind them. All of this suggest more downside in the coming week. Use this information as you prepare for the coming week and trad’em well.

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