SPY Trends and Influencers July 31, 2021

• Posted by Greg Harmon
• on July 31st, 2021

Last week’s review of the macro market indicators saw, with one week left in July, equity markets had shaken off a threat to the downside, with some reversing to all-time highs. Elsewhere looked for Gold ($GLD) to consolidate while Crude Oil ($USL) looked ready to continue the move higher. The US Dollar Index ($DXY) continued to drift to the upside while US Treasuries ($TLT) looked ready to pullback in their uptrend. The Shanghai Composite ($ASHR) looked to continue in consolidation while Emerging Markets ($EEM) pulled back in consolidation.

The Volatility Index ($VXX) looked to remain very low making the path easier for equity markets to the upside. Their charts looked strong, especially on the longer timeframe. On the shorter timeframe both the $QQQ and $SPY had reset on momentum measures and were moving in the next leg higher. The $IWM had also recovered from a breakdown and looked ready to join them to the upside, out of consolidation.

The week played out with Gold breaking consolidation to the upside late in the week while Crude Oil moved back toward the highs from earlier in the month. The US Dollar met resistance and fell back while Treasuries consolidated under resistance after the short pullback. The Shanghai Composite lost support in the consolidation and fell back towards longer term support while Emerging Markets retested the long term break out and have held for now.

Volatility rose up off the Friday low but remained in a subdued range in the teens. This put added pressure on equities early in the week and they responded by shifting from uptrend to choppy price action. All found support Tuesday and reversed through Thursday, before the large caps and tech names pulled back Friday. This resulted in the SPY and QQQ ending short of all-time highs set Monday with the IWM holding in its long consolidation range. 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 after a rebound from the 50 day SMA. It made another ATH Monday and then settled into a tight 6 point range for the week. The daily chart shows the RSI holding in the bullish range, but making a lower high, a momentum divergence, like the one that led to a pullback in May. The MACD is also making a lower high and turning to cross down. The price remains over the 20 day SMA though with the Bollinger Bands® pointing higher.

The weekly chart shows a doji at the high end of last week’s candle. The Bollinger Bands are pointing higher on this timeframe as well. The RSI is flat on the edge of overbought and strong with the MACD flat and high. There is resistance above at 441 and then the 200% extension of the retracement of the pandemic drop at 458. Support lower sits at 437 and 433.75 then 430.50 and 428.50 before 425.50. Uptrend.

SPY Weekly, $SPY

With the month of July in the books, equity markets showed some signs of being tired. Elsewhere look for Gold to possibly reverse higher while Crude Oil continues in an uptrend. The US Dollar Index continues to drift to the downside in the short term while US Treasuries push higher in an uptrend. The Shanghai Composite looks to continue the short term move lower while Emerging Markets trend lower at support.

The Volatility Index looks to remain low making the path easier for equity markets to the upside. Their charts look strong on the longer timeframe with the exception of the IWM which remains marking time sideways. On the shorter timeframe both the QQQ and SPY shift to short term consolidation with momentum divergences while the IWM muddles along. Use this information as you prepare for the coming week and trad’em well.

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