SPY Trends and Influencers May 1, 2021

Last week’s review of the macro market indicators saw with one week left in April the weather was turning warmer and equity markets were getting a spring in their step. Elsewhere looked for Gold ($GLD) to continue its short term move higher while Crude Oil ($USL) consolidated in a tight range. The US Dollar Index ($DXY) continued to move to the downside while US Treasuries ($TLT) bounced in their downtrend. The Shanghai Composite ($ASHR) looked to continue broad consolidation while Emerging Markets ($EEM) consolidated in the uptrend.

The Volatility Index ($VXX) looked to remain very low making the path easier for equity markets to the upside. Their charts also looked strong, especially on the longer timeframe, with the $SPY leading the charge and the $QQQ moving to join it while the $IWM consolidated. On the shorter timeframe the SPY was also the strongest with the QQQ starting to move higher and the IWM on the edge of a breakout. If that happened it might be time for the IWM to take the lead again.

The week played out with Gold consolidating over support in the move higher while Crude Oil pushed higher before profit taking Friday. The US Dollar continued to move lower while Treasuries took a breather and moved back lower. The Shanghai Composite churned under resistance while Emerging Markets moved over resistance to a higher high but could not hold it.

Volatility remained slightly up from 52 week lows but in the very low range. This was a neutral for equities and they had a narrow range for the week. They all tried a move higher Thursday but then pulled in Friday, leaving the SPY, the IWM and the QQQ little changed on the week What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week just short of the all-time high after recovering from a small dip. It rose slightly Monday to a new all-time high and held there through Wednesday. Thursday it gapped up and then filled the gap before a back half of the day reversal to close at a new all-time high. Friday saw profit taking, and a fall back to the mid week area. The daily chart shows 4 very narrow range days with the bump Thursday.

This is holding above the 161.8% extension of the retracement of the pandemic drop. The better than 2 week consolidation is now seeing the Bollinger Bands® start to squeeze. The RSI is diverging lower but still strong in the bullish zone with the MACD crossed down at a high level. It is still above the 20 day SMA and well above the 50 day SMA which have both acted as support and a springboard to new highs.

The weekly chart shows the price riding the upper of the Bollinger Bands higher. The RSI on this timeframe is holding on the edge of overbought with the MACD rising again and at a high level. There is resistance at 417.60 and 420 above and then the 200% extension at 458. Support lower comes at 413.50 and 411 then 407 and 403 before 400.70. Uptrend.

SPY Weekly, $SPY

With April in the books, equity markets continue to show strength, particularly in the larger caps. Elsewhere look for Gold to pause in the reversal higher while Crude Oil consolidates in its uptrend. The US Dollar Index continues to trend lower while US Treasuries possibly resume their downtrend. The Shanghai Composite looks to continue the slow drift sideways while Emerging Markets consolidate in their uptrend.

The Volatility Index looks to remain very low making the path easier for equity markets to the upside. Their charts look strong, especially the SPY and QQQ on the longer timeframe. The IWM remains in consolidation long term. On the shorter timeframe all three index ETFs have moved to a sideways consolidation. Use this information as you prepare for the coming week and trad’em well.

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