SPY Technical Analysis & Weekly Stock Market Update


Chart done on hourly timeframe. Market sentiment turned pessimistic last week after mixed economic data and earning results from Tesla and Netflix. September retail sales reflected a 0.7% increase vs the 0.3% expected. On one hand, strong retail sales indicate strong economic activity, but strong spending could also lead to an uptick in inflation. The Fed are using high interest rates to slow down spending and economic activity, so the unexpected jump in consumer spending was a mixed signal for the markets as it could lead to lingering inflation and further interest rates. The PCE report will be released this week, which is The Fed’s preferred inflation gauge. PCE has been slowly cooling down and moving in the favored direction of The Fed, so it’s key that it remains on that trend to avoid furthering uncertainty for markets. 

Tesla lost $30 billion in market cap last week after the company missed earnings estimates. The company’s profit margins have shrunk to their smallest return in two years, which can be attributed to higher interest rates, price cuts on certain models, and growing competition in the EV space. Tesla’s earnings miss sent EV company shares across the market lower as investor sentiment shifted negatively. The company’s CEO, Elon Musk, said that they’ll be implementing further tactics to reduce costs and help get the company back on track to growth. Shares of Tesla ended the week 15% lower. 

Netflix had a very different earnings followthrough than Tesla after the company reported their strongest subscriber growth in years, citing international markets to be the primary driver of success. Netflix came in-line with revenue expectations, but their biggest highlight was their earnings per share coming in at $3.73 vs the $3.49 expected. The company’s stock jumped nearly 20% following the report and managed to hold the highs through the market sell-off, making them a strong contender for a power earnings rally in the coming weeks. 

Technical analysis:

SPY’s sharp sell-off on Friday moved it below the 200 day moving average for the first time since March 2023. Experts on Wall Street use the 10, 20, 50, 100, and 200 day moving averages as support/resistance points, and as of Friday, SPY is now below all those levels, making the sentiment extremely bearish. Earnings from major companies such as: Amazon, Google, Meta, and Microsoft are scheduled this week, and if they’re not strong enough to move SPY back above the 200 day MA quickly, then bears could take control and send SPY much lower. The next support area in focus is 416.20-418.80, below that area SPY’s downside target is 410.00.