SPY Trends and Influencers May 2, 2020

Last week’s review of the macro market indicators saw heading into the last week of April, equity markets showed resilience holding up in the face of a massive move in Crude Oil. Elsewhere looked for Gold ($GLD) to continue higher while Crude Oil ($USL) might pause in the downtrend. The US Dollar Index ($DXY) continued to tighten its consolidation while US Treasuries ($TLT) remained in an uptrend. The Shanghai Composite ($ASHR) looked to continue in broad consolidation while Emerging Markets ($EEM) paused in their short term uptrend.

The Volatility Index ($VXX) looked to remain elevated but continuing to move lower, making the path easier for equity markets to the upside. Their charts had hit the pause button on the shorter timeframe. On the longer timeframe the $QQQ remained the strongest and had erased more of the drop than the $SPY and $IWM even less. All 3 were stalled at key retracement levels with the QQQ at a 61.8% retracement, the SPY 50%, and the IWM 38.2%.                  

The week played out with Gold pulling back to support while Crude Oil found support and reversed higher all week. The US Dollar fell back from resistance ending at support while Treasuries gapped down Monday and bounced, but was unable to recover the initial drop. The Shanghai Composite rode the 20 day SMA into the May Day holiday while Emerging Markets continued to move higher until giving it all back Friday.

Volatility fell back through Thursday but then jumped Friday to close the week higher. This took pressure off equities and they responded by starting the week with a 3 day move higher. All met resistance Wednesday and reversed to finish the week. This resulted in the SPY and QQQ ending the week lower but the IWM up over 2%. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week in a sideways consolidation at a 50% retracement of the drop. It was also holding over the 50 day SMA. It moved up early in the week, reaching the 61.8% retracement and then reversed Thursday. It continued lower Friday, ending the week down a fraction.

The daily chart shows the big drop Friday to disappoint but it remains over the 20 and 50 day SMA’s. The RSI did touch over 60 this week, barely 1 day, but sits near the mid line now. The MACD is positive and starting to roll lower. The Bollinger Bands® are also starting to tighten.

The weekly chart shows a long upper shadow that could not hold over the 200 week SMA. The RSI is flat at the mid line with the MACD rising but still negative. There is resistance above at 285 and 287 then 291 and 294 before 297 and 300. Support lower comes at 281 and 275 then 273 and 270 before 263.50 and 260. Pause in Uptrend.

SPY Weekly, $SPY

The books are closed on the first 4 months of the year and equity markets seem to be in need of some rest as they start May. Elsewhere look for Gold to consolidate in the uptrend while Crude Oil continues to move higher. The US Dollar Index continues in consolidation while US Treasuries consolidate in their uptrend. The Shanghai Composite looks to continue consolidation in a shortened week while Emerging Markets are poised for a possible reversal lower.

The Volatility Index looks to remain elevated and not so ready to move lower putting a speed bump in the path for equity markets. Their charts show consolidation in the shorter timeframe, holding in bullish ranges, but all have printed possible reversal candles on the longer timeframe. The QQQ continues to look the strongest with the SPY next and the IWM bringing up the rear. Use this information as you prepare for the coming week and trad’em well.

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