- SPY fails to make new lows on Friday.
- SPY recovers into the last hour of Friday trading.
- SPY set to breach June lows on Monday.
It is all happening in financial markets these past few sessions with some amazing moves being seen in interest rate and forex markets. This is hurting all risk assets as investors rush for a flight to safety. So far Bitcoin has held up remarkably well in the face of such risk aversion, but other risk assets have not fared so well. Stocks continue into freefall with some more big moves on Friday. The June lows just about held for the S&P 500 (SPY), but the Dow Jones did manage to set a new low for the year on Friday. Surely it cannot be long before the S&P 500 and Nasdaq (QQQ) follow suit.
SPY news
This morning saw more spectacular moves in fixed income with the yield on UK debt soaring by over 50bps and sterling completely collapsing. This is driving more risk aversion and will not in all likelihood see a rally in risk assets just yet. European equity markets remain under pressure as a result. Participants hoping for a bounce are unlikely to see one just yet. With UK interest rate markets now pricing in 200 bps of rate hikes by November, it is dragging all other bond yields higher as a result. US 2-year is up again in early trading, and this is likely to keep equities pressured. It is all eyes on the dollar at present as it puts pressure on sovereigns as well as corporates. These huge moves will increase pressure on company margins and likely see more disappointing earnings in Q3.
SPY forecast
$362 remains the June low that is likely to be broken on Monday. The question then becomes how much lower do we go and whether there is any bounce in sight. The answer is there is always a bounce at some stage, but the timing is difficult. The sentiment is terrible, and investors are in panic mode. Various indicators show this. Perhaps the most widely known in the CNN Fear & Greed Index.
Source: CNN.com
$352 is the next support if $362 is broken. The Relative Strength Index (RSI) is getting close to an oversold indication but is not yet there.
SPY daily chart
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