SPY Trends and Influencers September 11, 2021

Last week’s review of the macro market indicators saw heading into Labor Day Weekend, the unofficial end of summer, equity markets showing strength across the board. Elsewhere looked for Gold ($GLD) to continue its short term move higher while Crude Oil ($USL) also moved to the upside. The US Dollar Index ($DXY) continued to move lower while US Treasuries ($TLT) consolidated in their uptrend. The Shanghai Composite ($ASHR) looked to continue the move higher in broad consolidation while Emerging Markets ($EEM) showed signs of a possible reversal higher.

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 shorter timeframe. On the longer timeframe both the $QQQ and $SPY showed strength as well with new weekly highs. The $IWM was showing strong progress as it moved towards the top of the long consolidation range.

The week played out with Gold finding resistance and dropping back while Crude Oil consolidated in a tight range. The US Dollar found support and produced a weak bounce while Treasuries opened the week lower but ran higher all week. The Shanghai Composite continued its move higher while Emerging Markets stalled as they hit their longer moving averages.

Volatility rose up off the lows but stalled at a lower high. This put pressure on equities. They responded by in different ways with the tech heavy QQQ stalling and consolidating while the SPY and IWM moved lower. The SPY and IWM tried to rebound Thursday but fell back again to end the week, taking the QQQ down with them. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week pennies off the all-time high in a short term flat consolidation. It was also about at the level of separation from the 20 day SMA where it has reversed all of 2021. It started lower Tuesday and then gathered some speed as the week progressed. Friday it broke below the 20 day SMA printing a bearish Marubozu candle. This is the 5th month in a row that the SPY has started to pull back into the monthly options expiration week.

Each previous time it has found support and reversed with either a touch at the lower of the Bollinger Bands® or the 50 day SMA at the expiry. The expiry for September if Friday the 17th. The daily chart shows the RSI pulling back to the midline and a lower low. This is significant as a reversal in the RSI without a lower low in price would trigger a Positive RSI Reversal with an 18 point move higher as the target. The MACD is crossed down but remains positive.

The weekly chart shows a topping candlestick pattern just short of the 200% extension of the retracement of the pandemic drop. It is still well above the 20 week SMA and the RSI is now dropping out of overbought territory in the bullish zone. The MACD remains flat at an elevated level. There is resistance above at 447 and 449 then 451 and 454. Support lower comes at 444 and 441 then 437.50 and 436 before 430.50 and 428.50. Pullback in Uptrend.

SPY Weekly, $SPY

Heading into the September Options Expiration week, equity markets have started what has been there monthly pre-expiry pullback for the 5th month in a row. Elsewhere look for Gold to consolidate while Crude Oil also spends time moving sideways. The US Dollar Index continues in an intermediate term consolidation while US Treasuries consolidate at the retest of the 2019 highs. The Shanghai Composite looks to be breaking out of a long term broad consolidation to the upside while Emerging Markets consolidate in a short term bull flag.

The Volatility Index looks to be creeping higher making the path harder for equity markets to the upside. Their charts remain strong, especially on the longer timeframe for the SPY and QQQ with the IWM in the long term consolidation. On the shorter timeframe the SPY the IWM and the QQQ look to see an easier path to the downside short term. Use this information as you prepare for the coming week and trad’em well.

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