SPY Trends and Influencers September 10, 2022

• Posted by Greg Harmon
• on September 10th, 2022

Last week’s review of the macro market indicators saw with August in the books, and the unofficial end of summer upon us, equity markets showed a resumption of their losing ways. Elsewhere looked for Gold ($GLD) to continue its pullback while Crude Oil ($USO) continued to move lower as well. The US Dollar Index ($DXY) continued to drive to the upside while US Treasuries ($TLT) pulled back in their downtrend. The Shanghai Composite ($ASHR) looked to continue the short term move lower while Emerging Markets ($EEM) remained in a downtrend.

The Volatility Index ($VXX) continued to creep higher making the path easier for equity markets to the downside. Their charts looked weak on both timeframes as price approached the June lows. On the shorter timeframe both the $QQQ and $SPY had given up about 61.8% of the bounce from the June low, while the $IWM was holding a little stronger at only about a 50% retracement.

The week played out with Gold dropping back early and then consolidating while Crude Oil continued down to a 8 month low. The US Dollar rose to a new 20 year high while Treasuries fell to 8⅟₂ year lows. The Shanghai Composite found support and started to move higher while Emerging Markets retested the July low before a bounce to end the week.

Volatility held at elevated levels early and then marched lower the back half of the week. This removed the pressure on equities and they responded by ending the week with a 3 day move higher. This resulted in the SPY, IWM and QQQ ending up on the week after a strong sell off Monday. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week in a short term downtrend. It had retraced 61.8% of the drop from the January top to the June low and then given back nearly 61.8% of that bounce. It opened with a gap up Monday and continued higher in the morning only to reverse and close lower on the day. It held there Tuesday and then started a 3 day move to the upside Wednesday to end the week above the 50 day SMA. This is building a potential higher low following the higher high in August. A move back over the August high would now confirm an intermediate term trend reversal. The daily chart shows the RSI back over the midline and rising with the MACD turning to cross up.

The weekly chart shows a bullish engulfing candle moving up off that 61.8% retracement. The RSI on this timeframe is pushing towards the midline with the MACD trying to move up from a flat period but negative. There is still work to do on the longer timeframe and a move over the 50 week SMA would draw in buyers. There is resistance at 407.50 and 411 then 413.50 and 417 before 420 and 423.50. Support lower comes at 405.50 and 403.50 then 400.50 and 397.50 before 394.50 and 391.50 then 389.50 and 386. Short Term Uptrend.

SPY Weekly, $SPY

Heading into the September Quadruple Witching and Index Rebalancing week, equity markets showed strength with a rebound solid three day move higher to end the week. Elsewhere look for Gold to pause in its pullback while Crude Oil tries to reverse higher. The US Dollar Index continues in the uptrend while US Treasuries continue their downtrend. The Shanghai Composite looks to consolidate while Emerging Markets move to new lows.

The Volatility Index looks to pull back towards the normal zone making the path easier for equity markets to the upside. Their charts showed some strength, especially on the longer timeframe with bullish engulfing candles. On the shorter timeframe the SPY, IWM and QQQ may have just confirmed higher lows after the higher highs in August. Continuation to the upside and through the August high would confirm an intermediate trend reversal higher. Use this information as you prepare for the coming week and trad’em well.

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