SPY Technical Analysis & Weekly Stock Market Update


Chart done one hourly candles. Bullish activity was the strongest we’ve seen in months last week as buyers stepped in following multiple positive catalysts. First, labor market data indicated a rise in unemployment from 3.8% to 3.9%, which is ironically good news since higher unemployment leads to less consumer spending power, and that helps fight off inflation. The Federal Reserve was very clear early on in 2022 that in order to fight off inflation, there will likely need to be an uptick in unemployment, which is exactly what’s happening now. Another catalyst for last week’s move was The Fed’s decision to hold interest rates steady at 5.5%, making this the second FOMC in a row where they keep rates unchanged. The decision sparked hope that The Fed could be finished with the rate hike cycle. Higher rates are bad for stocks so any signal that The Fed is finished with its policy tightening is a good signal for buyers. Last but not least, The Treasury Department announced a newly detailed plan to accelerate the size of its auctions on notes and bonds in order to raise money and pay off debt. This was perhaps the most important announcement and the biggest catalyst to last week’s move as it helped relieve bond yields, which had been highly concerning for investors in October. However there’s still concern about whether or not the auction sales will come in line with expectations, we will find out in the weeks and months to follow. 

Coming into this week, markets will get a bit of a relief from high intensity earnings and reports. Most large cap technology companies have already reported numbers and many key economic reports have already been released, so market action will likely be driven more by technical analysis. The few reports to focus on this week are earnings from small to mid-cap companies such as Uber and Disney. Markets are also anticipating the quarterly household debt and credit report as well as the Consumer Sentiment Index. 

Technical analysis:

Despite SPY’s strong rally last week, buyers weren’t able to get a close above the key 438.60 level, which was the top of its pervious leg up in mid-October. This level is a key pivot point for SPY since it marks the trend reversal confirmation. Anywhere below that level, SPY is still considered to be making lower highs on the overall daily chart and could be sent back down to its October lower. Coming into this week, our focus will be whether SPY can achieve a successful close and hold above 438.60. To the downside, the first available support is 429.84, a break and close below that can break the overnight uptrend and send SPY back towards 418.00-420.00.