SPY Trends and Influencers January 16, 2021

• Posted by Greg Harmon
• on January 16th, 2021

Last week’s review of the macro market indicators saw with the first week of 2021 in the books, equity markets showed resilience with a strong move higher despite frightening political news. Elsewhere looked for Gold ($GLD) to continue its short term pullback in consolidation while Crude Oil ($USL) marched higher. The US Dollar Index ($DXY) continued to drift to the downside while US Treasuries ($TLT) moved in a downtrend.

The Shanghai Composite ($ASHR) and Emerging Markets ($EEM) were driving higher in uptrends. The Volatility Index ($VXX) looked to remain low and stable making the path easier for equity markets to the upside. Their charts looked strong on both timeframes. On the shorter timeframe both the $QQQ and $SPY sat at all-time highs in uptrends with the $IWM a tad bit overbought. On the longer timeframe all 3 were in very strong uptrends.

The week played out with Gold finding support and spending the week in consolidation until a drop late Friday while Crude Oil peaked Wednesday and by Friday had confirmed a short term double top in the uptrend. The US Dollar found support and stared to reverse higher while Treasuries bottomed and had a mild reversal higher. The Shanghai Composite continued up to a 2 year high while Emerging Markets are pennies away from a new all-time high.

Volatility continued to hold in a low range, ending up a couple of points on the week. This put pressure on equities later in the week and they responded with a move lower. As has been the case lately, Friday afternoon reversed that drop with a strong move higher, but it could not hold up into the close and they finished near the lows. This resulted in the SPY and QQQ ending off the recent all-time highs with the IWM just below its Thursday all-time high. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week at an all-time high and moving higher. It was outside of the Bollinger Bands® though. It moved back inside Monday and held there in a narrow range through Thursday. Friday it gapped down at the open and had recovered most of the loss by early afternoon. But it could not hold up and sold off the rest of the day to finish back at the low. It held over the 20 day SMA though, no real damage done at this point.

The daily chart shows the RSI curling lower in the bullish zone with the MACD ready to cross down but positive. The weekly chart shows an inside week with a small body candle, digestion. The Bollinger Bands on this timeframe remain pointing higher. The RSI is strong in the bullish zone with the MACD flattening but strong. There is resistance higher at 381.25. Support lower comes at 375.50 and 372.50 before 369 and 364.50 then 360. Short Term Pause in Uptrend.

SPY Weekly, $SPY

Heading into the Martin Luther King weekend and with January Options Expiration in the books, equity markets look a bit tired. Elsewhere look for Gold to continue its short term pullback while Crude Oil continues to trend higher. The US Dollar Index is trying to bounce in the downtrend while US Treasuries trend lower. The Shanghai Composite looks to continue higher while Emerging Markets meet resistance as they test all-time highs in an uptrend.

The Volatility Index looks to remain low but with an upward bias making the path harder for equity markets to the upside. Their charts look strong on the longer timeframe. On the shorter timeframe both the QQQ and SPY look gassed and are retrenching. The IWM continues to lead but may also be ready to pause. Use this information as you prepare for the coming week and trad’em well.

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