SPY Trends And Influencers February 23

Last week’s review of the macro market indicators suggested, heading into the Presidents Day shortened week that Gold (GLD) looked to continue lower toward the bottom of the long term channel, as Crude Oil (USO) consolidated in the move higher. The US Dollar Index (UUP) looked to continue towards a test of the top of a broad consolidation with US Treasuries (TLT) consolidating but biased lower. The Shanghai Composite (SSEC) was biased to the upside and Emerging Markets (EEM) were biased to the downside short term in their rising trend. Volatility (VIX) continued to look to be no factor creating an environment for the equity index ETF’s SPY, IWM and QQQ, to move higher. Their charts agreed, all with a bias higher, with the IWM strongest followed by the SPY and then the QQQ. A hard reversal on Treasuries or major move higher from the US Dollar seemed to be the only outside influencers that could derail the equity move higher.

The week played out with Gold continuing lower, before stalling just over support while Crude Oil pulled back to support. The US Dollar broke higher in a meaningful way while Treasuries continued their consolidation below resistance. The Shanghai Composite began a pullback while Emerging Markets took their queue from broad equities, dropping after the Fed minutes were released. Volatility bounced off of the lows, but sold off to end the week well off the highs. The Equity Index ETF’s fell quickly after the release of the Fed minutes Wednesday but recovered nearly half of the losses Friday. What does this mean for the coming week? Lets look at some charts.

SPY Daily, SPY

SPY Weekly, SPY

The SPY started the shortened week making a new high, and then took a header upon the release of the Federal Reserve Meeting Minutes on Wednesday afternoon. The pullback lasted all of 2 days and 3 points before a bounce higher to end the week Friday. The Relative Strength Index (RSI) on the daily chart also bounced after a trip near the mid line, remaining in bullish territory with a Moving Average Convergence Divergence indicator (MACD) continuing to roll over. The latter signals that maybe we are not done pulling back yet. The weekly picture shows a Hanging Man candle holding over the rising wedge. This is a reversal candle if confirmed lower next week. The RSI on the weekly picture is bullish, and strong though and the MACD signal line is still rising and nowhere near extreme levels, with a leveling histogram. This view could be stronger but it is not showing downside. Support lower is found at 150 and then 147.10, followed by 145.10 and 142.25. Resistance higher comes at 153.28 and then 157.46. Monday’s candle will likely determine the direction for the week. Short Term Potential Pullback Within Longer Term Uptrend.

Moving into the last week of February, the markets gave a wake up call, but then hit the snooze button. Gold is the exception testing long term support while a Crude Oil pulls back in the uptrend. The US Dollar Index looks to continue its move higher, with US Treasuries consolidating in the short term downtrend. The Shanghai Composite and Emerging Markets are biased to the downside as well. Volatility looks to remain low keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. The charts show potential for a short term pullback in the SPY and IWM, but the longer term looks to the upside. This pullback could be triggered by a continued strong rise in the US Dollar through the nearby major resistance, Gold and Oil turning long term bearish, or Treasuries reversing higher. However, the QQQ looks to be comfortable back in its channel within the long term consolidation. Its eventual breakout could be the key to the long term market direction. Use this information as you prepare for the coming week and trade well.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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