SPY Trends and Influencers March 5, 2022

Last week’s review of the macro market indicators saw with one trading day left in February, equity markets showed late week strength overcoming a geopolitically driven sell off and ending at the highs Friday. Elsewhere looked for Gold ($GLD) and Crude Oil ($USO) to possibly pause in their uptrends after printing reversal candles. The US Dollar Index ($DXY) continued to trend to the upside while US Treasuries ($TLT) trended lower. The Shanghai Composite ($ASHR) looked to continue in broad consolidation while Emerging Markets ($EEM) remained in a downtrend.

The Volatility Index ($VXX) looked to remain elevated putting a headwind up against the equity markets’ nascent recovery. Their charts looked hopeful on the shorter timeframe. On the longer timeframe both the $QQQ and $IWM still looked weak in short term trends lower. The $SPY looked the best holding at the lower end of a 19 month range.

The week played out with Gold driving higher while Crude Oil finally met some resistance and paused midweek. The US Dollar continued up to 21 month highs while Treasuries bounced around in a wide range ending higher. The Shanghai Composite continued to hold under resistance in consolidation while Emerging Markets dropped to 16 month lows.

Volatility continued to remain elevated ending the week up and at 13 month highs. This put pressure on equities and they fell into a wide range choppy consolidation. All found support Friday at the bottom of the range except for the QQQ that broke the range lower. This resulted in the SPY, the IWM and the QQQ all lower 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 rebounding higher from a new cycle low with a strong 2 day move. The euphoria around that slowly faded throughout the week though. It held in place Monday and gave up some ground Tuesday. It recovered again Wednesday and touched the falling 20 day SMA Thursday before pulling back the rest of the week.

It ended lower on the week, holding over the support area from January and October 2021. The daily chart shows the RSI leveling at another lower high for now and under the midline. This is also bearish territory. The MACD is crossed up but in negative territory. The weekly chart shows price clinging to support and below the 50 week SMA.

The RSI on this timeframe is down at the lower edge of the bullish zone and the MACD is negative and falling. There is support at 430.50 and 428.50 then 425.50 and 423 before 420 and 417.40 then 413.75. Resistance higher comes at 435.50 and 437.50 before 441 and 444 then 447 and 450. Pullback at Support.

SPY Weekly, $SPY

One week into the conflict in the Ukraine the equity markets are looking jittery and volatile. It is not helping that it is also a time when the Fed Chairman is speaking before Congress just two weeks before what has been a widely anticipated shift to a tightening monetary policy cycle. Are we having fun yet? Elsewhere look for Gold and Crude Oil to continue their moves higher toward all-time highs. The US Dollar Index also looks to continue to the upside while US Treasuries consolidate in their downtrend. The Shanghai Composite looks to continue in broad consolidation while Emerging Markets resumes its downtrend.

The Volatility Index looks to remain at a high level keeping the skittish news driven choppiness for equity markets. Their charts are looking weak on the shorter timeframe, making a series of lower highs since the end of the year tops. On the longer timeframe there are some mixed messages with the SPY continuing to hold over 7 month support, the IWM in sideways consolidation in a possible bear flag and the QQQ drifting lower in what might be a reversal pattern. Use this information as you prepare for the coming week and trad’em well.

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