SPY Trends and Influencers June 25, 2022

Last week’s review of the macro market indicators saw with the June options expiration in the books, equity markets showed acceleration to the downside. Elsewhere looked for Gold ($GLD) to consolidate while Crude Oil ($USO) pulled back in the uptrend. The US Dollar Index ($DXY) looked to pause in its move higher while US Treasuries ($TLT) continued their downtrend. The Shanghai Composite ($ASHR) looked to continue the trend higher while Emerging Markets ($EEM) continued to move lower.

The Volatility Index ($VXX) looked to remain elevated making the path easier for equity markets to the downside. Their charts looked horrible, especially on the longer timeframe. On the shorter timeframe the $IWM, the $QQQ and the $SPY could possibly consolidate or bounce due to the technical factors to give a reset on momentum measures. But there should be no mistaking that for a reversal, if they do, the trend remained to the downside.

The week played out with Gold holding in a tight range while Crude Oil continued to move lower. The US Dollar also held in a tight range while Treasuries bounced off their lows. The Shanghai Composite continued higher after an early week pause while Emerging Markets consolidated at the recent lows.

Volatility eased slightly from an elevated level but remained above long run trend. This took some pressure off equities and they moved higher. All broke above short term resistance Friday to print solid beginnings to a possible reversal. This resulted in the SPY ending back at the May lows with the IWM and the QQQ faring better pushing above that prior low. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week at a 17 month low and looking like more downside to come. The one piece of hope I noted was that multiple gap down moves on big volume, as was seen, are sometimes a sign of capitulation. It gapped up Tuesday and then had smaller moves higher through Thursday, bringing it back to where it had gapped down the prior week. Friday saw a gap over that level and a strong move higher all day ending with a bullish Marubozu candle on the daily chart.

This brought price back to the zone of the May low. The RSI is rising and at the midline with the MACD about to cross up. If last week was the ultimate bottom this is a good start to the reversal. The weekly chart printed a Marubozu candle that closed the gap from 2 weeks ago. The RSI on this timeframe is rising off of oversold but still in the bearish zone with the MACD flattening out but at an extreme over at least the past 30 years.

There is resistance higher at 394.50 and 397.50 then 400.50 and 403.50 before 405.50 and 407.50. Support lower comes at 389.50 and 386 then 380 and 376 before 373 and 369. Price needs confirmation of a new higher high over 417.50 to confirm a reversal. That is still a long way to go. Possible Short Term Reversal.

SPY Weekly, $SPY

With only 4 trading days left in the 2nd Quarter, equity markets mounted a strong rebound off of the lows and set up for at least short term continuation. Elsewhere look for Gold to continue to consolidate while Crude Oil pulls back from the highs. The US Dollar Index pause in its move to the upside while US Treasuries continue their downtrend. The Shanghai Composite looks to continue the trend higher while Emerging Markets continue to move lower.

The Volatility Index looks to slowly ease from elevated ground making the path easier for equity markets to the upside. Their charts are looking stronger following the week’s move, especially on the shorter timeframe. On the longer timeframe the moves required to call a confirmed reversal are still far above, about 5% more for the QQQ and 7% for the SPY to make a higher high. It will take another 9% for the IWM to get there. Those moves would only be first steps. Use this information as you prepare for the coming week and trad’em well.

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