SPY Trends and Influencers March 11, 2023

• Posted by Greg Harmon
• on March 11th, 2023

Last week’s review of the macro market indicators saw with February in the books, equity markets showed some strength with a rebound from a pullback following Fed comments. Elsewhere looked for Gold ($GLD) to continue its short term rise while Crude Oil ($USO) consolidated in a tight range. The US Dollar Index ($DXY) shifted into consolidation in its bounce while US Treasuries ($TLT) consolidated in a broad range.

The Shanghai Composite ($ASHR) looked to continue the move higher while Emerging Markets ($EEM) showed hints of a continuation of the uptrend from the October low. The Volatility Index ($VXX) looked to remain in the normal range and stable making the path easier for equity markets to the upside. Their charts were looking stronger, especially on the shorter timeframe. On the longer timeframe the $IWM, the $QQQ and $SPY all remained in bull flags looking positive.

The week played out with Gold pushing to the downside but quickly met support and raced higher to end the week little changed while Crude Oil fell back to the low end of the consolidation range. The US Dollar rose out of consolidation early but gave up the gains at the end of the week while Treasuries held consolidation until panic buying took hold Friday. The Shanghai Composite reversed Monday and moved lower all week while Emerging Markets also met resistance and fell back to test the lows of the year.

Volatility rose up off the lows late in the week as panic set in on bank liquidity issues in regional banks. This added to pressure on equities that they were already seeing following the Powell Congressional testimony and they responded with the worst week of the year. For the SPY it was the worst since September ending back at that falling trend line from 2022 now as support and near the low of the year. The QQQ fared better, ending at a 7 week low with the IWM posting its worst weekly performance since June 2020. All 3 are yet to make a lower low though. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week moving up off a retest at the 200 day SMA. It got off to a rocky start printing a Shooting Star candle Monday and then confirmed it as a reversal with a move lower Tuesday as Fed Chairman Powell testified before Congress. It held at the 50 day SMA Wednesday and then dropped hard Thursday and Friday as first Silvergate failed and then Silicon Valley Bank failed. These were the first banks to fail in over 2 years. The drop left the SPY at a 2 month low. The daily chart shows the volume was the heaviest in over a year. The RSI is into the bearish zone with the MACD turning back lower and now negative.

The weekly chart shows the bearish engulfing candle with the worst weekly performance since September. The RSI is dropping through the midline with the MACD level and positive. On a positive note, the SPY has yet to make its first lower low since the October bottom. There is support lower at 382 and 380 then 376 and 373 before 369 and 364.50. Resistance higher is at 386 and 389 then 391 and 394.50 before 397.50 and 400.50. Pullback in Short Term Uptrend.

SPY Weekly, $SPY

Heading into March options expiration, equity markets registered their worst week in months. Elsewhere look for Gold to continue its move higher and possibly out of consolidation while Crude Oil consolidates in a tightening range. The US Dollar Index looks to continue in consolidation while US Treasuries rise in their consolidation. The Shanghai Composite looks to pause in its uptrend while Emerging Markets trend lower.

The Volatility Index is now slightly elevated and looks to move higher making the path more difficult for equity markets to the upside. Their charts look damaged on the shorter timeframe, with the IWM looking similar to capitulation. On the longer timeframe the QQQ is holding up the best but looks better to the downside with the SPY and IWM nearing a test of the December low. If that happens the young uptrends are in jeopardy. Use this information as you prepare for the coming week and trad’em well.

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