SPY Trends and Influencers August 19, 2023

• Posted by Greg Harmon
• on August 19th, 2023

Last week, the review of the macro market indicators saw heading into the August options expiration, equity markets continued to show short term weakness fitting with the seasonal pattern. Elsewhere looked for Gold ($GLD) to continue its pullback while Crude Oil ($USO) was on the verge of a breakout higher with strong momentum. The US Dollar Index ($DXY) continued a short term move to the upside while US Treasuries ($TLT) pulled back.

The Shanghai Composite ($ASHR) looked to continue the pullback in consolidation while Emerging Markets ($EEM) consolidated. The Volatility Index ($VXX) looked to remain low and better to the downside making the path easier for equity markets to the upside. The charts of $SPY and $QQQ looked strong on the longer timeframe with the $IWM in a broad consolidation. On the daily timeframe the IWM, the QQQ and the SPY all looked messier with a bias lower short term.

The week played out with Gold continuing to move to the downside while Crude Oil failed in its breakout attempt and fell back. The US Dollar continued its move to the upside while Treasuries fell back to retest the October 2022 lows. The Shanghai Composite retreated to the low of the year while Emerging Markets dropped to the low end of its broad consolidation area.

Volatility crept higher, but remained in the teens. This put some pressure on equities that were already in a pullback and they went through a 4 day move lower. All found support by Friday and had a small bounce to finish the week. This resulted in the SPY and QQQ making 2 month lows with the IWM retesting the low from July. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week at the 50 day SMA on the daily chart after a pullback from a top at the end of July. It held there Monday and Tuesday and then dropped lower through Thursday. It opened with a gap down Friday and then rose all day to close the gap. It is out of the Bollinger Bands® on the daily chart with the RSI in the bearish zone and the MACD negative and dropping.

The weekly chart shows a third weekly drop, but price still above the 20 week SMA. The RSI is resetting lower in the bullish zone with the MACD about to cross down. There is support lower at 435.50 and 430 then 428.50 and 425.50 before 423.50 and 420. Resistance higher is at 437.50 and 444 the 447 and 451 before 454 and 457. Short Term Downtrend in Intermediate Term Uptrend.

SPY Weekly, $SPY

With the August options expiration in the books, equity markets continue to be under pressure heading into the coming week’s FOMC Jackson Hole Meeting. Elsewhere look for Gold to continue its pullback while Crude Oil pulls back in consolidation. The US Dollar Index continues to drift to the upside while US Treasuries trend lower. The Shanghai Composite and Emerging Markets look to continue to pullback in consolidation ranges.

The Volatility Index looks to remain low but with upside risk making the path harder for equity markets to the upside. The charts of the SPY and QQQ still look strong on the longer timeframe. On the shorter timeframe the QQQ has broken the June low and the SPY approaching it, turning both from short term down moves to trending lower. The IWM continues in a broad consolidation that started April 2022. Use this information as you prepare for the coming week and trad’em well.

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