SPY Trends and Influencers March 21, 2020

• Posted by Greg Harmon
• on March 21st, 2020

Last week’s review of the macro market indicators saw after a week of previously unseen price action with wild daily swings and huge volume, the equity markets entered a Bear Market. Elsewhere looked for Gold ($GLD) to continue its pullback while Crude Oil ($USO) paused in its drop. The US Dollar Index ($DXY) looked to continue to move back higher while US Treasuries ($TLT) pulled back in their uptrend. The Shanghai Composite ($ASHR) looked to consolidate under resistance while Emerging Markets ($EEM) moved lower. 

The Volatility Index ($VXXB) looked to remain extreme making the road for equities bumpy and wild. The Equity Index ETF charts were damaged with all holding below their 200 day SMA’s. The longer timeframes were now also favoring the bearish path. The lone bright spot was a big rally in the last 30 minutes to end an historic week.

The week played out with Gold dropping further Monday and then holding near 1500 while Crude Oil continued down to a 17 year low before a mid-week bounce that sold off Friday. The US Dollar continued higher reaching a 17 year high while Treasuries made a lower high and then dropped again, with a late week bounce but ended lower. The Shanghai Composite dropped to retest the February low before bouncing while Emerging Markets fell further before a Friday bounce.

Volatility as measured by the Volatility Index reached an all time high at 85 before a minor pullback. This increased the downward pressure on equities. They responded by starting the week moving lower Monday and again Wednesday. All continued to move in large intraday ranges. The IWM, QQQ and SPY continued to move lower Friday. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week off of a bounce that looked like it could have legs. But when the market opened Monday it was at a new low after a gap down. It bounced Tuesday but then fell back Wednesday and settled Thursday. Friday started positive with a gap up but then it sold off all day closing under the December 2018 low and the 38.2% retracement of the move from the 2009 low to the all-time high. The new 3 year low on the daily chart comes with the RSI holding at the edge of oversold territory with the MACD negative and at its lowest level in at least 30 years.

The weekly chart is well outside of the Bollinger Bands® after a second week of losses, this time over 15%. The RSI on this timeframe is oversold and moving lower with the MACD below the December 2018 low. There is support lower at 228 and 223 then 217 and 212 before 209. Resistance higher sits at 232 and 237 then 240 and 244 before 248 and 250. Downtrend.

SPY Weekly, $SPY

The calendar is turning to spring but there is anything but a refreshing new start in the markets with the worst week for equity markets since 2008. Elsewhere look for Gold to continue its pullback while Crude Oil drops possibly into the teens. The US Dollar Index continues to shine as it moves to the upside while US Treasuries pause in their uptrend. The Shanghai Composite looks to possibly reverse the downtrend while Emerging Markets continue to move lower.

The Volatility Index looks to remain extreme, keeping the boot on the throat of the equity index ETF’s. Their charts are broken on both the daily and weekly timeframe. On the shorter timeframe the IWM showed some stability in the short run while the SPY looks the weakest. The longer timeframe shows the QQQ the strongest of a weak bunch that is hemorrhaging. Use this information as you prepare for the coming week and trad’em well.

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