SPY Trends and Influencers October 1, 2022

• Posted by Greg Harmon
• on October 1st, 2022

Last week’s review of the macro market indicators saw with one week of trading left in the 3rd Quarter, equity markets continued to get pummeled as they re-approached the lows of the year following the September FOMC meeting. Elsewhere looked for Gold to continue its downtrend while Crude Oil continued lower as well. The US Dollar Index continued to push to the upside while US Treasuries pulled back in their downtrend. The Shanghai Composite looked to continue the trend lower while the Emerging Markets downtrend persisted.

The Volatility Index was elevated and looked to move higher making the path easier for equity markets to the downside. Their charts continued to look weak, especially on the longer timeframe. On the shorter timeframe the IWM, QQQ and SPY could use a reset on momentum measures as all three were extended to the downside. All three continued to trade in lockstep.

The week played out with Gold reversing to the upside midweek while Crude Oil saw its own midweek bounce but gave some that back at Friday. The US Dollar made a top Wednesday and pulled back while Treasuries ended lower despite a late week move up. The Shanghai Composite moved lower all week to end at a 4 month low while Emerging Markets accelerated their drop.

The Volatility Index rose above 30 for the first time in 3 months. This added to pressure on equities and likely prevented the weakening Dollar from benefiting them. The result was wide swings in the SPY, IWM and QQQ with all holding at their June lows. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week holding just above the June lows in a downtrend. It moved lower Monday and then held there Tuesday. It tried to move higher Wednesday after the Bank of England intervened but then fell back to that support Thursday. Friday it broke down to a new low. It ended the week at prices not seen since late November 2020. The daily chart shows the sharp decline with the RSI falling back into oversold territory. The MACD is now at the May and June low extremes but far above the 2020 low.

The weekly chart shows the full retracement of the June to August bounce and ending the week at the low on the 200 week SMA. The Bollinger Bands® are opening lower boding for more downside. It is also within 10 points of a 50% retracement of the post pandemic move higher. There is support lower at 356 and 353 then 348.20 and 346 before 344.70 and 342 then 341 and 339 followed by 336 and 332. Resistance higher sits at 358 and 360 then 364.50 and 369 before 373 and 376 then 380. Downtrend.

SPY Weekly, $SPY

With the 3rd Quarter wrapped up, equity markets showed further weakness ending at or below the prior lows of the year. Elsewhere look for Gold to continue its pullback while Crude Oil continues to move lower. The US Dollar Index continues to trend to the upside while US Treasuries pullback in their downtrend. The Shanghai Composite looks to continue the move lower while Emerging Markets accelerate to the downside.

The Volatility Index looks to remain elevated and heading higher making the path easier for equity markets to the downside. Their charts look weak, especially on the longer timeframe. On the shorter timeframe both the QQQ and SPY have now set new lows and still look weak. The IWM exhibited relative strength on the week, holding in consolidation. This was the first week since April that all 3 did not move in tandem. Use this information as you prepare for the coming week and trad’em well.

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