SPY Trends and Influencers July 3, 2021

• Posted by Greg Harmon
• on July 3rd, 2021

Last week’s review of the macro market indicators saw, with the June options expiration in the books, equity markets showed some weakness, especially outside of the Nasdaq. Elsewhere looked for Gold ($GLD) to continue its short term pullback while Crude Oil ($USL) paused in its uptrend. The US Dollar Index ($DXY) was ripping to the upside short term while US Treasuries ($TLT) drove higher as well. The Shanghai Composite ($ASHR) looked to continue to consolidate while Emerging Markets ($EEM) pulled back in consolidation.

The Volatility Index ($VXX) looked to remain low, but no longer very low, removing the wind at the backs of the equity markets. Their charts remained strong on the longer timeframe, with the $QQQ rising while the $SPY and $IWM held in consolidation. On the shorter timeframe both the IWM and SPY had given back some ground and looked a bit weakened as the QQQ held at the highs.

The current week continued with Gold bouncing in a tight range under 1800 while Crude Oil consolidated before a move higher late in the week. The US Dollar found support and reversed to the upside while Treasuries drifted higher. The Shanghai Composite consolidated before a steep drop Friday while Emerging Markets pulled back, this time from a slightly lower high.

Volatility dropped to 16 month lows out of the recent consolidation. This put removed pressure from equities and the large cap and tech focused indexes responded starting the week with a move lower. The SPY continued all week making new all-time highs along the way. The QQQ stalled quickly and held until another move higher Friday. The small cap index however dropped early and held in a tight range all week. 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 continued Monday, and then Tuesday and every day this week, printing 5 more new all-time highs. It closed the week on a very strong note expanding the recent tight range days. The daily chart shows the RSI rising to the edge of overbought territory in the bullish zone with the MACD also moving higher and positive. Neither momentum measure is overheated. The price is outside of the Bollinger Bands® though so a small pullback to consolidation would not be unexpected.

The weekly chart is very bullish with a strong follow on move up out of 10 week consolidation. The RSI on this timeframe is also on the edge of overbought and moving higher while the MACD is curling to cross up after a small reset lower. There is no resistance higher but the 200% extension of the retracement of the pandemic drop sits overhead at 458. Support lower comes at 428.50 and 425.50 then 423 and 420 before 417.40 and 413.75 then 411. Uptrend.

SPY Weekly, $SPY

With the books closed on the 2nd Quarter and heading into the 4th of July weekend, equity markets look very strong on the large cap and tech focused indexes. Elsewhere look for Gold to possibly move back higher while Crude Oil continues the uptrend. The US Dollar Index continues to rise in broad consolidation while US Treasuries pause in their reversal higher. The Shanghai Composite looks to remain in broad consolidation while Emerging Markets consolidate broadly over long term support.

The Volatility Index looks to remain very low making the path easier for equity markets to the upside. Their charts look strong, especially on the longer timeframe with the SPY and QQQ re-invigorating uptrends while the IWM continues to hold up in consolidation. On the shorter timeframe both the QQQ and SPY are running high on momentum measures so both could see a short term consolidation or digestive move. The tight Bollinger Bands® on the IWM might play a role then. Use this information as you prepare for the coming week and trad’em well.

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