SPY Trends and Influencers September 3, 2022

• Posted by Greg Harmon
• on September 3rd, 2022

Last week’s review of the macro market indicators saw with only 3 trading days left in August, equity markets had a week where they went from optimistic to horrified following the Jackson Hole speech. Elsewhere looked for Gold ($GLD) to continue its pullback while Crude Oil ($USO) resumed the downtrend. The US Dollar Index ($DXY) continued to move to the upside while US Treasuries ($TLT) consolidated in their downtrend. The Shanghai Composite ($ASHR) looked to continue a short term move lower while Emerging Markets ($EEM) remained in a downtrend.

The Volatility Index ($VXX) was slightly elevated and biased higher making the path more difficult for equity markets to the upside. The charts of $SPY, $IWM and $QQQ looked to take a further beating on the short term timeframe, possibly creating a new downtrend. On the longer timeframe there was still the prospect that June was the long term bottom until violated by a lower low. Meaning any reversal before then would be a positive.

The week played out with Gold continuing lower through Thursday before finding a bid Friday while Crude Oil continued down towards the August lows. The US Dollar rolled up to a new 20 year high while Treasuries crashed back down toward the June lows. The Shanghai Composite continued the move lower while Emerging Markets are back near a retest of 4 year support levels.

Volatility continued higher early in the week then fell hard the last 2 days only to recover Friday and end higher on the week. This put initial pressure on equities and they responded by starting the week with a 3 day move lower. All found support midday Thursday and reversed higher. Friday started with continuation following the non-farm payroll report but saw things turn south as traders sold off all afternoon to erase Thursday’s gains. This resulted in the SPY and QQQ retracing 61.8% of the June to August move with the IWM only a 50% retracement. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week came into the week following a sharp pullback in a short term downtrend. It continued lower early in the week, bottoming shortly after the open on Thursday. It reversed higher from there, rising to nearly unchanged on the week Friday morning, before giving it all up Friday afternoon and ending back near the low of the week. The daily chart shows the RSI now back into bearish territory with the MACD negative and moving lower. The weekly chart shows it has now retraced nearly 61.8% of the pop off the June low.

The RSI on this timeframe remains bearish with the MACD turning lower in negative territory. There is support lower at 391.50 and 389.50 then 386 and 382 before 380 and 376 then 373 and 369 followed by 364.50 and 360. A move under 360, making a lower low would bode for a possible second leg down. Alternatively, a reversal anywhere above that which can make a high above the August high increases the possibility that the June was the bottom. Resistance higher comes at 394.50 and 397.50 then 400.50 and 403.50 before 405.50. Short Term Downtrend.

SPY Weekly, $SPY

With August in the books, and the unofficial end of summer upon us, equity markets showed a resumption of their losing ways. Elsewhere look for Gold to continue its pullback while Crude Oil continues to move lower as well. The US Dollar Index continues to drive to the upside while US Treasuries pullback in their downtrend. The Shanghai Composite looks to continue the short term move lower while Emerging Markets remain in a downtrend.

The Volatility Index continues to creep higher making the path easier for equity markets to the downside. Their charts look weak on both timeframes as price approaches the June lows. On the shorter timeframe both the QQQ and SPY have now given up about 61.8% of the bounce from the June low, while the IWM is holding a little stronger at only about a 50% retracement. Use this information as you prepare for the coming week and trad’em well.

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