SPY Trends and Influencers March 13, 2021

• Posted by Greg Harmon
• on March 13th, 2021

Last week’s review of the macro market indicators saw that the first week of March created some havoc in equity market, whipsawing the Indexes as rotation continued. Elsewhere looked for Gold ($GLD) to continue its pullback while Crude Oil ($USL) continued to move higher. The US Dollar Index ($DXY) was starting to reverse to the upside while US Treasuries ($TLT) continued in their downtrend. The Shanghai Composite ($ASHR) looked to pause in its long term uptrend while Emerging Markets ($EEM) consolidated over long term support.

The Volatility Index ($VXX) looked to remain slightly above normal putting a bit of pressure on equity markets. Their charts continued to look strong on the longer timeframe but not as strong as last week. On the shorter timeframe the $SPY, the $IWM and the $QQQ all looked to be moving lower with the QQQ looking the weakest of the 3.

The week played out with Gold staging a small rebound while Crude Oil moved up over resistance and then consolidated. The US Dollar stalled and reversed in the move higher while Treasuries consolidated until a move lower again Friday. The Shanghai Composite found support and started higher while Emerging Markets also found support after making a new low and rose back higher.

Volatility settled lower Monday and then continued lower all week. This released the pressure on equities and the SPY and IWM responded by starting the week with a move higher and continued up all week. The QQQ joined them Tuesday but then chopped around more ending only slightly higher. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week in a possible rebound from a lower low the prior week. It tried to move higher Monday but fell back to the 50 day SMA. Tuesday it tried again, and this time continued to move higher through Thursday. Friday opened with a gap down, but it pushed higher all day to close the week at a new all-time high.

The daily chart shows this area holding price back previously. The RSI is rising in the bullish zone with a lot of upside room while the MACD has crossed up. Watch for any pullback now though as it would happen with an RSI divergence lower. The Bollinger Bands® are opening higher and note that the volume has been waning on this leg higher.

The weekly chart shows a strong candle higher after last week’s Hammer that probed down to the 20 week SMA. The RSI is turning up in the bullish zone with the MACD crossed down but mainly flat and positive. The Bollinger Bands on this timeframe are firmly pointing higher. There is no resistance higher, but there are important extensions of the retracement of the Pandemic drop above at 413 (161.8%) and 459 (200%). Support lower comes at 393 and 389 then 386 and 381.25 before 375.50. Uptrend.

SPY Weekly, $SPY

Heading into March options expiration, equity markets are mixed with small caps and large caps looking strong but the heavily tech weighted Nasdaq looking weaker. Elsewhere look for Gold to continue its pullback while Crude Oil continues to move higher. The US Dollar Index looks to pullback in the reversal higher while US Treasuries continue the downtrend. The Shanghai Composite is possibly reversing higher while Emerging Markets pullback in their uptrend.

The Volatility Index looks to remain low making the path easier for equity markets to the upside. The charts for SPY and IWM look strong, especially on the longer timeframe. On the shorter timeframe both are now making new highs signaling renewed short term strength. The QQQ is now the problem child with a series of lower highs signaling short term weakness, but with no real long term damage as yet. Use this information as you prepare for the coming week and trad’em well.

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