SPY Trends and Influencers September 24, 2022

• Posted by Greg Harmon
• on September 24th, 2022

Last week’s review of the macro market indicators saw heading into the week of the September FOMC meeting, equity markets pulled the rug out from under traders, giving up the nascent reversal off the early September low and driving to new 2 month lows. Elsewhere looked for Gold ($GLD) to continue its pullback while Crude Oil ($USO) continued to the downside as well. The US Dollar Index ($DXY) continued to trend to the upside while US Treasuries ($TLT) continued their downtrend. The Shanghai Composite ($ASHR) looked to continue the short term move lower while Emerging Markets ($EEM) continued their downtrend.

The Volatility Index ($VXX) was slightly elevated and threatening to move higher, making the path easier for equity markets to the downside. Their charts looked weak, especially on the longer timeframe following bearish engulfing weekly candles. On the shorter timeframe the $IWM, the $QQQ and the $SPY all printed hammer candles for a possible reversal, but at a lower low and the lowest level in two months, negating the hope of a reversal. Clearly Wednesday’s FOMC meeting would play a big role in whether markets continued towards a retest of the June lows or hung on and reversed higher. All 3 Index ETF charts were trading in lockstep.

The week played out with Gold holding under resistance until a drop to 2⅟₂ year lows Friday while Crude Oil continued the breakdown. The US Dollar Index continued to new 20 year highs while Treasuries made new 8⅟₂ year lows. The Shanghai Composite continued to drop while Emerging Markets made new 27 month lows.

Volatility broke out of a range to the upside Friday. This put added pressure on equities and they ended the week with a 4 day move lower. This resulted in the SPY, the QQQ and the IWM closing in on a retest of the 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 following an intraday move higher after a gap down in a downtrend to close the prior week. It opened lower Monday but drove higher all day to close the gap with a bullish Marubozu candle and bringing hope of a reversal at a higher low. That was not to be though. It followed with an inside day Tuesday and then 3 days of heading lower. Friday was a 91% down day that touched just above the June low before a rebound in the last 30 minutes.

The daily chart shows the finish outside of the Bollinger Bands® with a Hammer candle. The RSI is dipping into oversold territory with the MACD dropping and nearing the May and June lows. With momentum nearing oversold and a Hammer outside the Bollinger Bands there are conditions for a short term bounce.

The weekly chart shows the nearly full retracement of the bounce from the June low to the August high. There are no oversold conditions on this chart though with the RSI falling in the bearish zone and the MACD crossed down and falling and the Bollinger Bands opening lower. There is support lower at 364.50 and 360 then 358 and 356 before 353 and 348.20. Resistance above sits at 369 and 373 then 376 and 380 before 386 and 389.50. Downtrend.

SPY Weekly, $SPY

With one week of trading left in the 3rd Quarter, equity markets continue to get pummeled as they re-approach the lows of the year following the September FOMC meeting. Elsewhere look for Gold to continue its downtrend while Crude Oil continues lower as well. The US Dollar Index continues to push to the upside while US Treasuries pullback in their downtrend. The Shanghai Composite looks to continue the trend lower while the Emerging Markets downtrend persists.

The Volatility Index is elevated and looking to move higher making the path easier for equity markets to the downside. Their charts continue to look weak, especially on the longer timeframe. On the shorter timeframe the IWM, QQQ and SPY could us a reset on momentum measures as all three are extended to the downside. All three continue to trade in lockstep.  Use this information as you prepare for the coming week and trad’em well.

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