SPY Trends and Influencers October 21, 2023

• Posted by Greg Harmon
• on October 21st, 2023

Last week, the review of the macro market indicators saw heading into the heart of earnings season, equity markets showed early strength but got spooked at the end of the week, giving up most or all of their gains. Elsewhere looked for Gold ($GLD) to continue its possible reversal to the upside while Crude Oil ($USO) drove higher as well. The US Dollar Index ($DXY) looked to continue to move to the upside while US Treasuries ($TLT) settled in their uptrend. The Shanghai Composite ($ASHR) looked to continue lower while Emerging Markets ($EEM) consolidated over long term support.

The Volatility Index ($VXX) looked to remain low but with a bias higher, making the path more difficult for equity markets to the upside. Their charts looked weak on the shorter timeframe with late week reversals from lower highs continuing short term downtrends. On the longer timeframe both the $QQQ and $SPY were holding in bullish ranges with momentum gauges reset and ready to move back higher. The $IWM continued in consolidation on that timeframe though.

The week played out with Gold pushing to the upside and meeting resistance Friday as it hit $2000 while Crude Oil continued to move higher. The US Dollar held in a tight range while Treasuries continued lower, nearing the ETF’s all-time low. The Shanghai Composite and Emerging Markets also moved lower, both ending near a 50 week low.

The Volatility Index rose and held into the 20’s for the first time since March. This put pressure on equities and they responded with a 3 day move lower to end the week. This resulted in the SPY and QQQ ending back near the early October lows but the IWM printing a new 52 week low. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week in consolidation in a bounce after nearly touching the 200 day SMA on the daily chart. It held there through Tuesday and then started lower to the 20 day SMA Wednesday. Thursday it broke down through the 20 and 150 day SMA’s and followed through the 200 day SMA Friday. This confirms another lower high on the drop from July month end. The RSI is falling in the bearish zone with the MACD crossing down and in negative territory with the Bollinger Bands® opening lower.

The weekly chart printed a bearish engulfing candle after 3 narrow range weeks. The RSI is falling through the midline with the MACD dropping but positive. There is support lower at 420 and 417.50 then 413.50 and 411 before 407.50 and 405.50 then 402.50 and 400.50. Resistance higher is at 423.50 and 425.50 then 428.50 and 430 before 435 and 437.50. Downtrend.

SPY Weekly, $SPY

With the October options expiration in the books, equity markets renewed weakness as bond yields soared higher. Elsewhere look for Gold to continue its assault in the all-time highs while Crude Oil consolidates in a run higher. The US Dollar Index looks to consolidate the break out while US Treasuries drive down to their all-time low prices. The Shanghai Composite and Emerging Markets continue to look better to the downside.

The Volatility Index looks to remain low but rising making the path more difficult for equity markets to the upside. Their charts also look weak, especially on the shorter timeframe. On the longer timeframe both the IWM and SPY are making lower lows suggesting more downside, while the QQQ hangs on at support. Use this information as you prepare for the coming week and trad’em well.

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