SPY Trends and Influencers January 1, 2021

Last week’s review of the macro market indicators saw with just 4 trading days left in 2020, equity markets remained strong. Elsewhere looked for Gold ($GLD) to continue its short term uptrend while Crude Oil ($USL) worked slowly higher. The US Dollar Index ($DXY) continued to look better to the downside while US Treasuries ($TLT) pulled back in their downtrend. The Shanghai Composite ($ASHR) looked to consolidate in a broad range over long term support while Emerging Markets ($EEM) trended higher.

The Volatility Index ($VXX) looked to drop slowly making the path easier for equity markets to the upside. Their charts looked strong, especially on the longer timeframe, with the $IWM and $QQQ marching higher and the $SPY in consolidation. On the shorter timeframe both the QQQ and SPY were resetting momentum measures with the IWM driving higher.

The week played out with Gold pushing to the upside and making a higher high while Crude Oil consolidated around the new higher range. The US Dollar made a lower low before finding support bouncing while Treasuries moved slightly higher. The Shanghai Composite pushed up out of consolidation higher while Emerging Markets also made a higher high before profit taking Thursday.

Volatility held in a tight range at normal levels. This took pressure off equities but they responded in mixed fashion. The SPY and QQQ moved higher Monday and then held, ending the year at new all-time highs. The IWM also started higher but fell back to end near the 20 day SMA. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week at the 20 day SMA with tightening Bollinger Bands® after a slight pullback from all-time highs. It gapped higher Monday and then drifted up to a new all-time high close Thursday for the year. The Bollinger Bands on the daily chart are very tight now. The RSI is rising in the bullish zone with the MACD flat and about to cross up.

The weekly chart shows a gap up out of a 4 week consolidation. The Bollinger Bands are shifted to the upside as price moves higher. The RSI is strong in the bullish zone with the MACD rising and positive. There is no resistance above 314.70. Support lower comes at 372.25 and 369 then 364.50 and 360 before 358 and 356. Uptrend.

SPY Weekly, $SPY

With the books closed on 2020, equity markets ended on a positive foot, looking strong with more upside to come, after a wild first quarter drop. The IWM and SPY both ended the year up over 15% after being down over 30% in March. The QQQ put them to shame climbing over 47% on the year.

Elsewhere look for Gold to continue its short term move higher, pressuring the bull flag, while Crude Oil drifts to the upside. The US Dollar Index continues to move lower while US Treasuries continue their downtrend. The Shanghai Composite looks to continue the breakout to the upside while Emerging Markets slowly move higher.

The Volatility Index looks to remain low making the path easier for equity markets to the upside. Their charts look strong, especially on the longer timeframe. On the shorter timeframe both the QQQ and SPY have regained their momentum while the IWM has reset momentum a bit lower, perhaps for another run to the upside. Use this information as you prepare for the coming week and trad’em well.

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