SPY Trends and Influencers October 28, 2023

Last week, the review of the macro market indicators saw with the October options expiration in the books, equity markets with renewed weakness as bond yields soared higher. Elsewhere looked for Gold ($GLD) to continue its assault in the all-time highs while Crude Oil ($USO) consolidated in a run higher. The US Dollar Index ($DXY) looked to consolidate the break out while US Treasuries ($TLT) drove down to their all-time low prices. The Shanghai Composite ($ASHR) and Emerging Markets ($EEM) continued to look better to the downside.

The Volatility Index ($VXX) looked to remain low but rising making the path more difficult for equity markets to the upside. Their charts also looked weak, especially on the shorter timeframe. On the longer timeframe both the $IWM and $SPY were making lower lows suggesting more downside, while the $QQQ hung on at support.

The week played out with Gold holding in consolidation just under $2000 while Crude Oil dropped back to support out of a rising wedge. The US Dollar held in consolidation above support while Treasuries continued toward the all-time low. The Shanghai Composite found support and reversed higher while Emerging Markets continued down to near 52 week lows.

Volatility met resistance and fell back modestly, but remaining at 8 month highs. This continued to put pressure on equities and they moved lower. All found support Thursday with the QQQ reversing Friday and the SPY and IWM holding at the low, until late day sell pushed everything back to the low of the week. This resulted in the SPY and QQQ in correction mode, more than 10% off the July high and with the IWM closing in on a 20% drop. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week retesting the September low as it was falling back from a lower high. It held Monday and Tuesday, at the 200 day SMA on the daily chart, and then went on a 3 day bender lower to retrace 61.8% of the move up off the March low. It is also more than 10% off of the July top. The RSI is into oversold territory with the MACD negative and falling.

The weekly chart shows a second strong week of selling but with price now well outside of the Bollinger Bands®. The RSI on this timeframe is also into the bearish zone with the MACD dropping and about to turn negative. There is support lower at 407.50 and 405.50 then 402.50 and 400.50 before 399 and 396.50. Resistance higher is at 411 and 413.50 then 417.50 and 420 before 423.50 and 425.50. Downtrend.

SPY Weekly, $SPY

With just 2 trading days left in October and an FOMC meeting next week, equity markets are pressing to move past a correction to something bigger. Elsewhere look for Gold to continue its assault on $2000 while Crude Oil consolidates. The US Dollar Index continues to consolidate the move to the upside while US Treasuries continue in their downtrend. The Shanghai Composite looks better lower while Emerging Markets also remain in a downtrend.

The Volatility Index looks to remain at moderate levels but rising making the path easier for equity markets to the downside. Their charts look weak, especially the IWM and the SPY. The QQQ has also changed to looking better lower as the big news of the week. Use this information as you prepare for the coming week and trad’em well.

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