SPY Trends and Influencers March 7, 2020

Last week’s review of the macro market indicators saw with the first 2 months of the year in the books, equity markets had their worst week in years, driving lower with alacrity never seen before. Elsewhere looked for Gold ($GLD) to pullback while Crude Oil ($USO) continued to drive lower. The US Dollar Index ($DXY) looked to continue lower in the short term while US Treasuries ($TLT) prices rose to set record highs.

The Shanghai Composite ($ASHR) looked to pullback after its move higher while Emerging Markets ($EEM) moved lower in broad consolidation.  The Volatility Index ($VXXB) looked to remain extreme making the path easier for equity markets to the downside. Their charts looked horrible in the short term, but overextended so there was a possibility of a bounce or outright reversal. The longer term charts showed a lot more damage, with the $IWM sitting on long term support but the $SPY and $QQQ driving lower.

The week played out with Gold finding support, reversing and rocketing higher while Crude Oil reversed an earlier bounce and fell hard. The US Dollar continued to move lower while Treasuries plateaued after the big run until a massive move higher Friday. The Shanghai Composite gapped down to start the week but reversed to end at the high of the year while Emerging Markets pushed higher early but failed and fell back to the lows.

Volatility pulled back Monday but then held and pushed back higher Friday. This gave equities some room to recover early. They gave back gains Tuesday and then rallied again Wednesday before 2 strong down days to end the week. It was a week of massive price moves that ended with the SPY and QQQ up on the week and the IWM lower. Market participants no doubt did not feel like it was an up week though. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY had ended the prior week with a bounce off of the lows, but still at a 5½ month low. It jumped hard Monday but gave up that gain Tuesday, Wednesday saw another higher high on a big move. Thursday the range closed a bit and it ended lower again. Friday it gapped down, ending the alternation but found support at a higher low and drove up into the close.

The daily chart shows massive volume over the past 2 weeks with the RSI bouncing out of oversold but then stalling and reversing lower again. The MACD continues to move lower and is now at levels not seen since the December 2018 low. The price sits under the 200 day SMA with the Bollinger Bands® wide and opening lower.

The weekly chart shows the price bouncing off of the 100 week SMA. The RSI is holding at the lower edge of the bullish zone with the MACD falling but positive. There is support at 296.50 and 294 then 292 and 290 before 287 and 285. Resistance above sits at 298.50 and 300 then 302.50 followed by 304.50 and 307.50 before 310. Consolidation in Downtrend.

SPY Weekly, $SPY

Heading into the second week of March the equity markets remain in distress with volatile moves and pulling back. Elsewhere look for Gold to continue higher while Crude Oil continues to the downside. The US Dollar Index looks to continue lower as well while US Treasuries make new highs. The Shanghai Composite continue higher in broad consolidation while Emerging Markets move lower.

The Volatility Index looks to remain at extreme levels keeping the pressure on equity markets. Their charts look weak, especially on the shorter timeframe. On the longer timeframe both the QQQ and SPY had indecision candles, perhaps a reversal, but also a possible continuation lower. The IWM looks much weaker but at support. Use this information as you prepare for the coming week and trad’em well.

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