SPY Trends and Influencers August 25, 2018
- Posted by Greg Harmon
- on August 25th, 2018
Last week’s review of the macro market indicators noted with August options expiration over and back to school on its way, the equity markets continued to look strong on the longer timeframes. Elsewhere looked for Gold ($GLD) to continue lower while Crude Oil ($USO) joined it heading to the downside. The US Dollar Index ($DXY) might pause in its uptrend while US Treasuries ($TLT) drifted higher in broad consolidation.
The Shanghai Composite ($ASHR) and Emerging Markets ($EEM) were looking really weak as they printed multi-year lows and continued lower. Volatility ($VXX) looked to remain subdued keeping the bias higher for the equity index ETF’s $SPY, $IWM and $QQQ. Their charts were a bit mixed in the shorter timeframe with the QQQ pulling back, the IWM flat and the SPY running higher. But all three remained in solid uptrends on the longer basis.
The week played out with Gold finding a bottom and reversing higher, with strength Friday while Crude Oil turned to the upside as well. The US Dollar retrenched at support while Treasuries continued their drift up towards resistance. The Shanghai Composite is building a base at the 2016 low while Emerging Markets are bouncing toward resistance.
Volatility drifted lower on the week, keeping the bias higher for equities. The Equity Index ETF’s all moved higher against this backdrop, with the IWM the first to make new all-time highs and then the SPY following with the QQQ bringing up the rear, but not far behind. What does this mean for the coming week? Lets look at some charts.
The SPY had just filled a gap from earlier in August as last week ended. It was closing in on the all-time high from January as well. Monday it inched higher to a better than 6 month high. Tuesday it made a new intraday all-time high but could not hold it into the close. Wednesday and Thursday continued to hold just under a new record and then Friday it finally happened.
A strong end to the week saw the SPY close at a new all-time high. The Bollinger Bands® are angled higher to allow the run to continue. The RSI is rising and bullish with the MACD very flat and positive, but trying to turn up. It may not be rising quickly with big point gains but it is rising and strong.
The weekly chart shows the steady run higher more clearly. The break to a new high also gives a target to about 300. The RSI on this timeframe is strong and rising, but nowhere near extreme. The MACD is rising and positive. And the Bollinger Bands on this timeframe are also rising in a channel. There is no resistance above. Support lower comes at 286 and 284 then 283 and 280 before 279 and 277.50. Uptrend.
As the summer winds down with the last week of August coming up the equity markets are waking up and moving higher. Elsewhere look for Gold to possibly bounce around in its downtrend while Crude Oil moves higher. The US Dollar Index is stalling in its uptrend while US Treasuries may be on the verge of breaking their consolidation to the upside. The Shanghai Composite continues to look weak and with an easier path lower while Emerging Markets are bouncing in their downtrend.
Volatility looks to remain at very low levels keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts are aligned with that view. The shorter daily timeframe shows all 3 back in uptrends, with the QQQ the only one short of its all-time high level. The weekly charts all look fantastic as well and show lots of upside potential. Use this information as you prepare for the coming week and trad’em well.
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Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)