SPY Technical Analysis & Weekly Stock Market Update


Chart done on hourly timeframe. Earnings season kicked off last week with financial institutions such as JPMorgan, Citibank, and Well Fargo all topping expectations and boosting their forecasts. Although bank earnings were great, the market gave up much of its gain on Friday due to rising conflict in the Middle East and a weakened consumer sentiment reading. The University of Michigan’s preliminary October consumer sentiment index fell to 63 on Friday’s reading, which is the lowest in five months, and it could explain the sharp downside move market saw to end the week. 

Earnings season will continue this week with many prominent companies such as: Netflix, Tesla, Goldman Sachs…etc. reporting. Wall Street boosted corporate earnings projections early this month, so analysts are expecting strong numbers. There is no better determinant of market / company valuations than earnings so all eyes will be on these reports to gauge whether they are true to their value. 

Last but not least, scheduled this week are September retail sales numbers. As mentioned earlier, consumer sentiment came in below expectations, so retail sales figures should help clear up the picture on just how consumers are spending their capital. Reports about consumer spending hold high significance because consumers are at the frontline of the economy and make up 2/3 of U.S. GDP. Strong consumer spending helps keep The Fed on track of guiding the economy to a soft landing while battling inflation. 

Technical analysis:

The 10 and 20 day moving averages are acting as the biggest support to SPY on the daily chart as of now, so they will be our main supports in focus coming into this week. SPY is in a challenging position on the daily chart because although it has the 10/20 MA acting as support, it has the 50/100 MA acting as resistance just above, so it may take sometime to build enough strength to breakout, if it does. The 50/100 MA lines are both trading around last week’s rejection point of 438.60-440.00, so buyers need a move above that level to see further upside continuation towards 445.00. We have to note that there was a high level of call buying on The Volatility Index (VIX) to end the week last week so we must be prepared for a potential further downside move to retest the 420.00 support.