SPY Technical Analysis & Market Overview


Chart done on hourly timeframe. Stocks drifted lower last week as the latest comments from  Federal Reserve members spooked traders, but the pull back was a much needed one.  Many stocks are moving at overbought levels that need a “cool down” period before potentially rallying higher. As stocks pulled back, we noticed capital rotation into the crypto space and crypto related stocks, a correlation we haven’t seen in a while. Money flowing into crypto is a good sign that investors are gaining confidence in high risk markets again, so even if it works inversely to stocks in the short term, it will benefit financial markets generally in the long term.  

Economic reports to watch:

Next week’s economic data will provide updates on the U.S. GDP Growth Rate (Q1), retail inventories, and the PCE report. 

    • GDP report: the final reading of Q1 will be released Thursday June 29th. Previous readings showed an increase of 3.8%, which questions the recession argument the media is making.
    • Retail inventories: U.S. retailers have struggled to sell-off their excess inventory. The latest report showed warehouse inventories over 770B dollars, a historical number. The build up of inventory started as a result of the supply chain issues during the lockdowns. Retailers ordered large orders that arrived too late and by the time they came, the seasons changed and so did consumer sentiment.
    • The Personal Consumption Expenditures Price Index is another report like the CPI that updates the latest reading on inflation. April’s reading ticked higher from 4.2% to 4.4%, which is a sign that inflation is still lingering in prices of goods and services. The Federal Reserve prefer this index to measure inflation so if it continues the uptrend then it’s more likely that there will be further interest rate hikes. 

Technical analysis:

SPY overnight trend coming into this week is bearish. The index struggled to find buyers last week and finished very close to its critical 432.00 level, which is the main support in focus to start the week. Although the overnight trend is bearish, overall charts are still bullish and this decline may be a pull back before a further rally. Many stocks still maintained their 52-week highs, despite the index pull back, so buyers are still active in select pockets of the market. SPY in specific has to get back above the 437.00 level to regain buyer confidence and potentially set a rally back to 442.00-444.00.