Last week’s review of the macro market indicators noted with March Options Expiration done and spring around the corner the Equity Index ETF’s looked mixed but positive. Elsewhere looked for Gold ($GLD) to consolidate with a downward bias while Crude Oil ($USO) consolidated in a tight range. The US Dollar Index ($DXY) was also consolidating in a downtrend, trying hard to reverse it, while US Treasuries (iShares 20+ Year Treasury Bond (NASDAQ:TLT)) were showing signs of a potential reversal to the upside.
The Shanghai Composite (ASHR) and Emerging Markets (iShares MSCI Emerging Markets (NYSE:EEM)) continued to consolidate, the former around long term support and resistance, and the latter at the highs. Volatility ($VXX) looked to continue to drift lower easing the pressure on the equity markets. Their charts all showed retrenchment in the short term, with the iShares Russell 2000 (NYSE:IWM) trying to reverse and lead them all higher. On the longer picture the IWM and QQQ looked strong with the SPDR S&P 500 (NYSE:SPY) stuck in broad consolidation.
The week played out with Gold moving sideways but that lasted just 2 days before a strong move higher while Crude Oil also broke its consolidation to the upside. The US Dollar was the exception, continuing to consolidate while Treasuries moved lower early in the week before reversing back up. The Shanghai Composite held steady until Friday when it dumped lower while Emerging Markets headed lower.
Volatility picked up and continued to rise through the week, putting pressure on equities. The Equity Index ETF’s all moved lower on the week, with the QQQ leading to the downside. The SPY (NYSE:SPY) and QQQ took out their March lows while the IWM held above. What does this mean for the coming week? Lets look at some charts.
SPY Daily
The SPY had pulled back from a higher high and filled a gap, with progressively smaller candles as it entered the week. It was at the 20 day SMA and seemed to be settling. But that was not the case. It gapped down Monday and then moved lower. Tuesday and Wednesday saw smaller inside candles holding at support. But then Thursday it gapped down under the 100 day SMA and drove lower. Friday continued the move down leading to the 200 day SMA.
The second touch at the 200 day SMA in 2 months came on a bearish Marubozu candle, but one that is well outside of the Bollinger Bands®. The daily chart shows the RSI on the verge of moving into oversold territory with the MACD negative and falling. The volume on this leg lower is increasing, but far less than on the February move down. The short term chart carries a negative bias, but with a possible short term bounce from the oversold conditions.
The weekly chart still has room to the lower Bollinger Band, sitting just below the 50 week SMA. The RSI is making a lower low and crossing the mid line as the MACD is continuing lower, but still positive. It was a bearish Marubozu candle on the week, suggesting more downside, and frankly this timeframe looks worse than the daily one. There is support lower at 257 and 255 followed by 253.50 and 250 before 248.50. Resistance above comes at 260 and 262.50 then 265 and 267 before 269 and 272.50. Short Term Downtrend.
SPY Weekly
With another Fed rate hike behind it and now the prospect of trade wars, the equity markets finished the week breaking down and looking weak. Elsewhere look for Gold to continue in its uptrend while Crude Oil also moves higher. The US Dollar Index seems content to move sideways while US Treasuries are biased to continue to the upside. The Shanghai Composite and Emerging Markets are biased to the downside within broad consolidation.
Volatility looks to remain elevated keeping the bias lower for the equity index ETF’s SPY, IWM and QQQ. Their charts show short term weakness continuing and for the first time in years the prospect of intermediate term weakness in the SPY and IWM. The QQQ remains the best chart on the longer timeframe. Use this information as you prepare for the coming week and trad’em well.
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