SPY Trends and Influencers June 8, 2024

Last week, the review of the macro market indicators saw with the month of May in the books, equity markets showed some signs of weakness following divergences last week. Elsewhere looked for Gold ($GLD) to continue its consolidation in the uptrend while Crude Oil ($USO) consolidated in a narrow range after a pullback. The US Dollar Index ($DXY) continued to drift to in broad consolidation while US Treasuries ($TLT) continued their downtrend. The short term move higher in the Shanghai Composite ($ASHR) looked to be at risk of reversing while Emerging Markets ($EEM) entered a short term downtrend.

The Volatility Index ($VXX) looked to remain very low and stable making the path easier for equity markets to the upside. The charts of the $SPY and $QQQ looked strong on the longer timeframe, but with a possible momentum reset continuing in the short run. On the shorter timeframe, both the QQQ and SPY had reset to their 20 day SMA’s where they often find support. How they react during the week could tell if last week was meaningful or not. The $IWM continued to be the laggard, stalled near the top of a 2 year range.

The week played out with Gold pushing out of consolidation to the upside before dropping back Friday while Crude Oil dropped out of consolidation early but found support and recovered much of the drop. The US Dollar also dropped early before it found support and rebounded to end higher on the week while Treasuries broke trend resistance to the upside and then fell back to retest it as support. The Shanghai Composite continued to move lower while Emerging Markets held in short term consolidation at last week’s gap move lower.

Volatility inched lower relieving pressure on equities and the large cap and tech names. They responded mid-week with a 2 day move higher to new all-time highs on the S&P 500 and Nasdaq 100. All paused Thursday ahead of the payroll report Friday. Then the SPY and QQQ held just under the new highs while the IWM remained in a narrow range. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week holding over the rising 20 day SMA on the daily chart after a shallow pullback from an all-time high. It continued to ride the 20 day SMA on Monday and Tuesday and then broke higher Wednesday, ending at a new all-time high. It held there Thursday and probed to the upside Friday before pulling back to finish unchanged on the day. The RSI on the daily chart shows a push back higher leveling which could lead to a momentum divergence should it not continue up next week. The MACD crossed up Friday and is positive though with the Bollinger Bands® squeezing but shifting to point higher.

The weekly chart shows the break of the small consolidation to the upside. The RSI is on the edge of overbought, very strong, suggesting any weakness on the daily chart may be short lived or corrected through time, not price. The MACD is also high and positive and moving sideways. There is resistance at 535 and the target from the Cup and Handle above at 560. Support is now at 530 and 524.50 then 520.50 and 517.50 before 513.50 and 510. Uptrend.

SPY Weekly, $SPY

With the first week of June in the books, equity markets were mixed with the large caps and tech heavy Nasdaq showing renewed strength while small caps continue to flounder. Elsewhere look for Gold to continue to consolidate the long move higher while Crude Oil moves lower in a consolidation range. The US Dollar Index continues in broad consolidation while US Treasuries continue their long term downtrend. The Shanghai Composite looks to continue the short term move lower while Emerging Markets continue the short term move lower in a consolidation channel.

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 both the QQQ and SPY continue to step higher and look strong as well with an eye on potential momentum divergences. The IWM continues to be dead money, as it has been for the past 2½ years. Use this information as you prepare for the coming week and trad’em well.

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