SPY Trends and Influencers July 24, 2021

• Posted by Greg Harmon
• on July 23rd, 2021

Last week’s review of the macro market indicators saw, with July options expiration and the first week of earnings season are in the books, that equity markets came through them a bit worse for wear. Elsewhere looked for Gold ($GLD) to continue its short term uptrend while Crude Oil ($USL) pulled back in its move higher. The US Dollar Index ($DXY) continued a short term move higher in consolidation while US Treasuries ($TLT) moved to the upside. The Shanghai Composite ($ASHR) looked to continue consolidation while Emerging Markets ($EEM) pullback as they consolidated over long term support.

The Volatility Index ($VXX) looked to remain low making the long term path easier for equity markets to the upside but drifting up to give them short term trouble. The $SPY and $QQQ charts continued to look strong on the longer timeframe, with the $IWM testing support in its long consolidation. On the shorter timeframe both the QQQ and SPY were in pullbacks while the IWM is at risk for a bigger drop.

The week played out with Gold dropping back to the big round number and pausing while Crude Oil dropped hard Monday but reversed and climbed higher the rest of the week to end little changed. The US Dollar closed the April gap and paused in the move higher while Treasuries spiked higher on what might be a blow off top and then reversed. The Shanghai Composite tried to break the recent range but could not hold up while Emerging Markets rose off the 200 day SMA only to give it all back with a gap down Friday.

Volatility spiked Monday but then raced lower to end back in the teens. This put initial pressure on equities and they responded by starting the week with a big move lower. All found support by late Monday though and then reversed higher the rest of the week. This resulted in the SPY and QQQ ending the week with new all-time highs while the IWM stalled mid week and held in the lower part of the long term range. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week pulling back from an all-time high and nearing the 20 day SMA. It gapped down Monday, through the 20 day SMA, and touched the 50 day SMA for the first time in a month. It then bounced and held near the opening level. Tuesday saw a non-eventful open and then a power move to the upside all day finish at the 20 day SMA. Price continued to move higher the rest of the week ending Friday at a new all-time high. The daily chart shows the price at the flat but tightening Bollinger Bands®. The RSI is rising in the bullish zone with the MACD crossing up and positive.

The weekly chart shows a large bullish engulfing candle ending near the highs. The RSI on this timeframe is strong at the edge of overbought with the MACD flat and positive. There is resistance at 440, and then the 200% extension of the retracement of the pandemic drop at 458 above. Support lower comes at 437 and 433.75 then 430.50 and 428.50 before 425.50 and 423 then 420. Uptrend.

SPY Weekly, $SPY

With one week left in July, equity markets have shaken off a threat to the downside, with some reversing to all-time highs. Elsewhere look for Gold to consolidate while Crude Oil looks ready to continue the move higher. The US Dollar Index continues to drift to the upside while US Treasuries may be ready to pullback in their uptrend. The Shanghai Composite looks to continue in consolidation while Emerging Markets pullback in consolidation.

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. On the shorter timeframe both the QQQ and SPY have reset on momentum measures and are moving in the next leg higher. The IWM has also recovered from a breakdown and may be ready to join them to the upside, out of consolidation. Use this information as you prepare for the coming week and trad’em well.

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