SPY Trends and Influencers January 5, 2019

Last week’s review of the macro market indicators noted with one trading day left in the year equity markets had put in a strong case for a reversal on the week. They were still a long way from confirming a bottom though and not just a bear flag building. Elsewhere looked for Gold ($GLD) to continue in its uptrend while Crude Oil ($USO) might pause in the downtrend. The US Dollar Index ($DXY) continued to consolidate sideways while US Treasuries ($TLT) paused in their uptrend.

The Shanghai Composite ($ASHR) and Emerging Markets ($EEM) continued to show an easier path to the downside. Volatility ($VXX) looked to remain elevated keeping the bias lower for the equity index ETF’s $SPY, $IWM and $QQQ. Their charts showed a strong bounce during the week but not enough to do anything to alter the current downtrends. Very short term uptrends were beginning, but it was too soon to declare a bottom.

The week played out with Gold racing higher until it hit 1300 and sold off Friday while Crude Oil held in place before a surge higher at the end of the week. The US Dollar bounced around but held in a narrow range while Treasuries broke a range higher before giving some back Friday. The Shanghai Composite continued lower until a bounce Friday while Emerging Markets made a small move higher off of a higher low.

Volatility moved lower all week, but in the 20’s, easing some of the pressure on equities. The Equity Index ETF’s had big swings with 3 days of the 4 moving more than 2%. The IWM broke higher out of a range that held for 4 days while the SPY and QQQ held at the top of their ranges, before peeking over the top. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY had paused after a post-Christmas bounce as it entered the last trading day of 2018. It held there in a calm day New Year’s Eve. Wednesday saw a big gap down at the open get closed, returning it to the prior day’s level. Then Thursday had another gap down open but this time it sold off all day. Friday was the third gap, this time to the upside, and was followed by a strong run higher.

Three sessions and 3 wide range days to start the year. All of this brought the SPY back to its 20 day SMA. A good start but a long way from a reversal. The daily chart shows the RSI pushing higher but still short of the mid line with the MACD crossed up but negative.

The weekly chart shows the bounce back at the 38.2% retracement from the 2016 low to the top in September. The RSI is rising but in the bearish zone with the MACD slowing its descent. There is resistance at 254 and 255 then 257.50 and 261 before 262.50. Support lower comes at 250.50 and 249 then 248 and 246 before 241.50. Possible Reversal in Downtrend.

SPY Weekly, $SPY

Heading into the first full week of 2019 the equity markets have shown some short term strength but still have a long way to go to claim a reversal. Elsewhere look for Gold to continue in its uptrend while Crude Oil joins it moving higher. The US Dollar Index will continue to move sideways while US Treasuries pause in their uptrend. The Shanghai Composite will continue to move lower while Emerging Markets may pause in their downtrend.

Volatility looks to continue to fall from elevated levels easing the pressure on the equity index ETF’s SPY, IWM and QQQ. Their charts look ready for more upside after a strong week with the IWM leading the charge and the QQQQ and SPY not far behind. Use this information as you prepare for the coming week and trad’em well.

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