SPY Trends and influencers June 19, 2021

Last week’s review of the macro market indicators saw, heading into the June options expiration week, equity markets were revving their engines and heating up as they drifted around all-time highs. Elsewhere looked for Gold ($GLD) to consolidate around 1900 while Crude Oil ($USL) continued higher. The US Dollar Index ($DXY) remained consolidating from the downtrend while US Treasuries ($TLT) had started a nascent move to the upside. The Shanghai Composite ($ASHR) looked to continue to consolidate the break higher while Emerging Markets ($EEM) were stuck in broad consolidation over the long term range.

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 way. On the shorter timeframe all 3 were breaking higher, with the SPY at all-time highs. The $QQQ was trending higher and less than $1 from its high while the $IWM broke a long consolidation pattern less than $3 from its high.

The week played out with Gold moving sharply lower while Crude Oil finally met some resistance mid-week and pulled in. The US Dollar had a fast 2 day move higher following the FOMC meeting Wednesday while Treasuries backtested their break out and then bolted to the upside. The Shanghai Composite pulled back from resistance while Emerging Markets moved lower within the consolidation range.

Volatility rose up off of 52 week lows and this time did not reverse. This put pressure on equities and they responded by starting the week with a 2 day drift lower. Wednesday the SPY and QQQ accelerated down and Thursday the IWM joined, but with a strong bounce to a new all-time high in the QQQ. They all finished the week moving lower Friday. 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. It printed another one on Monday and then held there Tuesday. Wednesday saw a sharp move lower to the 20 day SMA begin before the FOMC statement was released and then it recouped about half of that drop Thursday. Friday saw a gap down under the 50 day SMA hold there all day for the first close under the 50 day SMA since March 4th. This was also at the lower of the Bollinger Bands®. The RSI on the daily chart has dropped through the mid line but remains over the May low in bullish territory. The MACD is crossed down and positive.

The weekly chart shows that this brings price back to the 161.8% extension of the retracement of the pandemic drop. This has been a support area for 2 months. The RSI on this timeframe is pulling back from an overbought condition with the MACD crossed down and relatively high. Price also remains well above the 20 week SMA. There is resistance at 417.40 and 420 then 423 and 425.50. Support lower comes at 413.75 and 411 then 407 and 403 then 400.70. Consolidation.

SPY Weekly, $SPY

With the June options expiration in the books, equity markets showed some weakness, especially outside of the Nasdaq. Elsewhere look for Gold to continue its short term pullback while Crude Oil pauses in its uptrend. The US Dollar Index is ripping to the upside short term while US Treasuries drive higher as well. The Shanghai Composite looks to continue to consolidate while Emerging Markets pullback in consolidation.

The Volatility Index looks to remain low, but no longer very low, removing the wind at the backs of the equity markets. Their charts remain strong on the longer timeframe, with the QQQ rising while the SPY and IWM hold in consolidation. On the shorter timeframe both the IWM and SPY have given back some ground and look a bit weakened as the QQQ holds at the highs. Use this information as you prepare for the coming week and trad’em well.

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