SPY Trends and Influencers October 13, 2018

Last week’s review of the macro market indicators noted after one week of October the equity markets had given up strength, with some sectors bleeding red in the shorter frame while holding key levels on the longer timeframe. Elsewhere looked for Gold ($GLD) to consolidate in the downtrend while Crude Oil ($USO) paused in its move higher. The US Dollar Index ($DXY) was moving higher in consolidation while US Treasuries ($TLT) were trending lower.

The Shanghai Composite ($ASHR) came back from vacation looking like a possible reversal to the upside but Emerging Markets ($EEM) had resumed their downtrend. Volatility ($VXX) had perked up, making it more difficult for the equity index ETF’s $SPY, $IWM and $QQQ. The IWM was in a full blow short term downtrend but at support on the longer timeframe. The QQQ was consolidating on the longer timeframe but also leaking in the shorter view. The SPY looked the strongest on that longer timeframe but was also dipping to retest the January highs in the short run.

The week played out with steady movement early. As it hit mid week, some changes were happening. Gold spiked higher Thursday and held there while Crude Oil broke to the downside on Wednesday finding support at the end of the week. The US Dollar pulled back all week while Treasuries reversed their fall and started to rise mid week. The Shanghai Composite gapped down and then accelerated lower late in the week while Emerging Markets continued in their downtrend.

Volatility got more woke and spiked over 20 Wednesday for the first time since April shifting the bias lower for equities. The Equity Index ETF’s reacted with big moves to the downside. The IWM just continued its trend lower after a pause Monday, with the QQQ and the SPY joining Wednesday and with big drops. What does this mean for the coming week? Lets look at some charts.

SPY Daily, $SPY

The SPY came into the week having retested the January high. It held there Monday and Tuesday with small body candles. Wednesday it drove hard to the downside, printing a bearish Marubozu candle. That continued Thursday taking it below its 200 day SMA for the first time since the beginning of May. Wednesday and Thursday were the highest volume days since the February lows.

It bounced Friday, holding steady and closing at the 200 day SMA. The daily chart shows the RSI had gone into oversold territory before reverting back over 30 Friday. The MACD is falling and negative. Price is also outside of the Bollinger Bands®.

On the weekly chart the bounce happened at the lower Bollinger Band and it ended back over the 50 week SMA. The RSI is falling through the mid line with the MACD crossed down and falling. There is support lower at 274.50 and 272.50 then 271.40 and 269. Resistance higher comes at 277.50 and 279 then 280 and 281 before 284 and 286. Short Term Shift to Downtrend.

SPY Weekly, $SPY

The equity markets had their worst week and deepest correction since the February and March pullbacks. Elsewhere look for Gold to rise in the short term while Crude Oil pulls back in its uptrend. The US Dollar Index continues to mark time sideways while US Treasuries are bouncing in their downtrend. The Shanghai Composite looks weak as it makes 4 year lows and Emerging Markets may be ready to reverse their downtrend.

Volatility looks to remain elevated keeping the bias lower for the equity index ETF’s SPY, IWM and QQQ. Their charts show short term trend changes to the downside and are close to longer term trend changes as well. The IWM is now over 11% off its high and looking the worst, while the QQQ has bounced after dropping more than 10%. The SPY also bounced, after a smaller 8% pullback. Use this information as you prepare for the coming week and trad’em 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.