SPY Trends and Influencers April 3, 2021

Last week’s review of the macro market indicators saw heading into the shortened week and the end of the 1st Quarter, equity markets showed resilience with a rebound from a mid-week dive. Elsewhere looked for Gold ($GLD) to possibly reverse out of its pullback while Crude Oil ($USL) consolidated in its digestive move. The US Dollar Index ($DXY) had turned to a short term trend to the upside while US Treasuries ($TLT) bounced in their downtrend. The Shanghai Composite ($ASHR) continued to pullback in the uptrend while Emerging Markets ($EEM) looked close to a long term breakout retest as they pullback.

The Volatility Index ($VXX) looked to remain low and close to filling the pandemic gap, making the path easier for equity markets to the upside. Their charts looked strong on the longer timeframe, but there was a clear ranking emerging with the $SPY strongest and moving higher, the $IWM with a possible broadening top and the $QQQ holding support after a digestive pullback. On the shorter timeframe both the IWM and the QQQ also looked weaker than the SPY as they showed short term trends lower while the SPY attacked the all-time high.

The week played out with Gold pulling back to test support nd then reversing to end nearly unchanged while Crude Oil continued to consolidate. The US Dollar met resistance in the uptrend while Treasuries may have put in a higher low in their downtrend. The Shanghai Composite pushed up out of short term consolidation in the downtrend while Emerging Markets turned back higher and over trend resistance.

Volatility moved lower and accelerated down Friday, finally closing the gap up from the start of the pandemic, over a year ago. This put the wind in the sails for equities and they responded by moving higher. The SPY led the charge ending the week at a new all-time high and over 400. The IWM and the QQQ had back-to-back gap and hold days to come out of short term consolidation and the IWM re-approach the all-time highs. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY had broken a short term pullback and was moving back towards all-time highs as the week started. It held there through Wednesday, unable to make a new high. Thursday saw it open over resistance and run to a new all-time high closing over 400. The daily chart shows the RSI rising in the bullish zone with the MACD moving up and positive. The price is nearing the upper of the Bollinger Bands®, so a pause may be in order.

The weekly chart shows the break of intermediate resistance and continuing higher. The Bollinger Bands had squeezed and are now opening. The RSI is holding strong in the bullish zone. The MACD is level after a long rise. There is no resistance higher, but the target on a Measured Move from the March 2020 low into and out of the mid-year consolidation is a move to 440. Support lower comes at 397 and 395 then 393 and 389 before 386 and 381.25. Uptrend.

SPY Weekly, $SPY

With the first Quarter of 2021 in the books, equity markets are painting a mixed picture, but broadly positive. Elsewhere look for Gold to possibly reverse out of consolidation to the upside while Crude Oil pauses in its uptrend. The US Dollar Index continues in the short term uptrend while US Treasuries are pausing in their downtrend, and possibly reversing higher. The Shanghai Composite is also looking at a possible reversal to the upside while Emerging Markets pullback in their uptrend.

The Volatility Index looks to remain very low and possibly move lower, making the path easier for equity markets to the upside. Their charts look strong on the longer timeframe, led by the SPY. There looks to be a rotation going back into the QQQ as the IWM marks time. On the shorter timeframe both the QQQ and IWM lag the SPY again with the IWM looking stronger than the QQQ on this scale. Use this information as you prepare for the coming week and trad’em well.

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