SPY Trends and Influencers May 25, 2024

Last week, the review of the macro market indicators saw with the May options expiry in the books, equity markets showed renewed strength moving to new all-time highs. Elsewhere looked for Gold ($GLD) to continue its uptrend while Crude Oil ($USO) consolidated in a pullback. The US Dollar Index ($DXY) continued to pullback in its short term uptrend while US Treasuries ($TLT) bounced in their downtrend. The Shanghai Composite ($ASHR) looked to continue the short term move higher while Emerging Markets ($EEM) built a short term uptrend.

The Volatility Index ($VXX) looked to remain very low and stable 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 were now consolidating moves to new all-time highs with the $IWM closing in on 2½ year highs.

The week played out with Gold peaking with an all-time high Monday before dropping back the rest of the week while Crude Oil broke its consolidation to the downside. The US Dollar found support and bounced to a lower top while Treasuries fell back from a lower high. The Shanghai Composite fell back to support while Emerging Markets retrenched in their short term uptrend.

Volatility fell to a nearly 5 year low before a bounce but it remained below the teens. This put pressure on equities late in the week and they responded by selling off Thursday. All reversed Friday to finish the week little changed. This resulted in the SPY and IWM ending slightly lower with the QQQ near its all-time high from earlier in 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 just pennies off the all-time high, in a short consolidation. It printed new all-time highs Monday and Tuesday, but it failed to move significantly away from the 138.2% extension of the retracement of the 2022 move lower at 530. Wednesday saw little change and then Thursday it moved higher in the pre-market then sold off all day to drop back to nearly fill the gap from May 15th. It printed an outside day that was a bearish Marubozu that measured to a retest of the end of March high. Friday did not see any follow through as it rebounded and had a tight range inside day. The RSI on the daily chart has pulled back from over bought in the bullish zone with the MACD rolling over towards a cross down.

The weekly chart printed a doji, an indecision candle, near the top of the 4 week run higher. The RSI is rolling though at a lower level, creating a bearish divergence with price. Too early to act on this but something to watch. The MACD, on the other hand, is looking to cross back higher and positive. There is resistance at 530 and a target on the Cup and Handle above that to 560 near the 161.8% extension of that retracement. Support lower is at 524.50 and 520.50 then 517.50 and 513.50 before 510 and 503.50. Uptrend.

SPY Weekly, $SPY

With the unofficial start of summer Monday and just 4 trading days left in May, equity markets were mixed with tech strong, large caps flat and small caps lower. Elsewhere look for Gold to continue to consolidate in the uptrend while Crude Oil resumes a short term downtrend. The US Dollar Index may resume the short term move lower while US Treasuries remain in a downtrend. The Shanghai Composite looks to pause in the short term move higher while Emerging Markets may be confirming a failed break out higher.

The Volatility Index looks to remain very low and stable making the path easier for equity markets to the upside. The charts of the SPY and QQQ look strong, especially on the longer timeframe. On the shorter timeframe the QQQ is also strong with the SPY in consolidation. The IWM continues to be the outlier, consolidating at a higher range. Use this information as you prepare for the coming week and trad’em well.

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