SPY Trends and Influencers December 18, 2021

• Posted by Greg Harmon
• on December 18th, 2021

Last week’s review of the macro market indicators saw heading into December options expiration week, equity markets showed resilience with a rebound from an ugly prior 2 weeks. Elsewhere looked for Gold ($GLD) to continue in consolidation while Crude Oil ($USL) might resume the uptrend. The US Dollar Index ($DXY) continued to trend higher while US Treasuries ($TLT) looked to be back in consolidation. The Shanghai Composite ($ASHR) remained in consolidation while Emerging Markets ($EEM) continued to trend lower.

The Volatility Index ($VXX) had moved back into the normal range making the path easier for equity markets to the upside. Their charts looked strong, especially the large caps and tech stocks. On the shorter timeframe the $SPY was leading with a new all-time high, then the $QQQ just off the pace. On the longer timeframe both the SPY and QQQ looked very strong. The $IWM was now back in consolidation and floundering again.

The week played out with Gold pushing to bottom of the consolidation range early before a thrust higher to end the week while Crude Oil continued to consolidated at recent highs. The US Dollar paused in its trend higher while Treasuries held firm under resistance. The Shanghai Composite spiked to the top of the consolidation range while Emerging Markets dropped to the bottom of the falling channel.

Volatility held in a narrow range near the lows of the prior week. This left equities to be pushed around by position squaring around options expiration and the FOMC meeting and press conference. They fluctuated wildly in both directions before ending mostly lower on the 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 close. It fell back Monday and gapped down Tuesday, closing below the 20 day SMA. Wednesday saw a recovery to within pennies of the prior high only to fall back Thursday and Friday, ending the week at the 50 day SMA. This is also at the 200% extension of the retracement of the pandemic drop.

The daily chart shows the Bollinger Bands® are running sideways now. There is a negative momentum divergence, although the indicators are in the bullish range. The RSI is falling back from a lower high with the MACD also crossing down from a lower high.

The weekly chart shows a negative momentum divergence as well. The RSI is falling back in the bullish zone with the MACD crossed down but positive. The price remains above the 20 week SMA. There is resistance above at 460 then 463.60 and 466 then 470 and 471. Support below comes at 457 then 454 and 450 before 447 and 444 then 441. Consolidation in Uptrend.

SPY Weekly, $SPY

With the December Quadruple Witching in the books, equity markets showed some weakness. Elsewhere look for Gold to continue its consolidation while Crude Oil consolidates as well. The US Dollar Index looks to pause in the uptrend while US Treasuries consolidate. The Shanghai Composite looks to continue in consolidation as well while Emerging Markets continue to move lower.

The Volatility Index looks to remain in the normal range easing the pressure on equity markets. Their charts look vulnerable on the shorter timeframe. On the longer timeframe both the QQQ and SPY look stronger while all three, including the IWM, remain in consolidation. Use this information as you prepare for the coming week and trad’em well.

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