SPY Trends and Influencers November 27, 2021

Last week’s review of the macro market indicators saw with the November options expiration in the books, equity markets were looking mixed with large caps and tech strong but small caps showing weakness. Elsewhere looked for Gold ($GLD) to continue its move higher while Crude Oil ($USL) pulled back in its uptrend. The US Dollar Index ($DXY) continued to look strong with more upside while US Treasuries ($TLT) consolidated. The Shanghai Composite ($ASHR) looked to consolidate as well while Emerging Markets ($EEM) pulled back in a bull flag.

The Volatility Index ($VXX) looked to remain low but rising giving equity markets little to worry about. The charts of the $SPY and $QQQ looked strong on both timeframes but especially on the longer timeframe. The $IWM however was looking weak and at risk for a breakdown on both timeframes. A reversal early in the week could fix that quickly though.

The week played out with Gold making a 2 day move lower to start the week while Crude Oil waited until Friday to collapse. The US Dollar continued a march higher until a Friday selloff while Treasuries traded in a wide range ending back near the summer highs. The Shanghai Composite found resistance in consolidation and formed a lower high while Emerging Markets fell back to new lows on the year.

Volatility held under recent resistance until an explosion higher Friday. This put pressure on equities late in the week and they responded with a sharp drop Friday. This resulted in the SPY falling back to one month lows, the QQQ almost 3% lower than the recent all-time highs and the IWM back firmly in the middle of the prior 9 month consolidation zone. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week barely off the all-time high. It opened and moved to a new intraday high Monday before a pullback to end the day lower. It held there and then Wednesday closed just off the all-time high again. When markets opened on Friday though it had gapped down on news and moved lower the entire day. It closed the week at the low for the month.

The daily chart shows the drop taking the price to the lower edge of the Bollinger Bands® and out of the almost month long consolidation. The RSI dropped through the midline with the MACD positive but moving lower for nearly a month. The weekly chart shows a bearish engulfing candle pulling back toward the prior high and the 200% extension of the retracement of the pandemic high.

The RSI on this timeframe is dropping out of overbought territory with the MACD about to cross down but positive. There is support lower at 460 and 457 then 454 and 450 before 447 and 444. Resistance higher sits at 463.60 and 466 before 470. Pullback in Uptrend.

SPY Weekly, $SPY

With 2 trading days left in November, equity markets are showing some degree of weakness in the short term. Elsewhere look for Gold to consolidate after a pullback while Crude Oil pulls back from multi-year highs. The US Dollar Index continues to trend to the upside while US Treasuries consolidate. The Shanghai Composite looks to continue in broad consolidation while Emerging Markets extend losses in a downtrend.

The Volatility Index looks to remain elevated making the path more difficult for equity markets to the upside. Their charts remain mixed with the SPY and QQQ stronger than the IWM. For the strong ones, they continue to look stronger on the longer timeframe. On the shorter timeframe both the QQQ and SPY are resetting momentum measures and at risk for more pullback.

The IWM is right in the middle of the longer term consolidation covering all of 2021, but in a downtrend on the daily chart. The Hammer candle on the gap down to end the week could show us that the worst is over after more than an 8% drop. Use this information as you prepare for the coming week and trad’em well.

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