SPY Trends and Influencers July 11, 2020

Last week’s review of the macro market indicators saw with the first half of the year in the books, equity markets showed renewed strength into the holiday weekend. Elsewhere looked for Gold ($GLD) to continue higher while Crude Oil ($USL) joined in a move to the upside. The US Dollar Index ($DXY) continued to drift lower in consolidation while US Treasuries ($TLT) consolidated. The Shanghai Composite ($AHR) looked to continue to the upside while Emerging Markets ($EEM) also moved higher. 

The Volatility Index ($VXX) looked to continue to move lower making the path easier for equity markets to the upside. Their charts also looked strong, especially on the longer timeframe with the QQQ leading the charge. On the shorter timeframe the $QQQ was also leading with the $SPY at the June gap and the $IWM trailing.

The week played out with Gold pressing to a 9 tear high before meeting resistance while Crude Oil continued to drift higher until getting slapped down Thursday, before reversing higher Friday. The US Dollar continued to move towards the June low while Treasuries jumped to a higher high in a reversal. The Shanghai Composite exploded to nearly 2½ year highs while Emerging Markets gapped up and held in place.

Volatility staged a small bounce but remained in a narrow range. This put mid-week pressure on equities and they responded in mixed fashion. The SPY, most sensitive to the Volatility Index, retreated toward the end of the week. The IWM moved lower all week until Friday. The QQQ bucked the trend and new all-time highs before stalling Friday. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week at resistance since June and at the 78.6% retracement of the drop from the February high to the March low. This was also in the gap from June. It moved slightly higher Monday and then held in a tight range the rest of the week, short of a gap fill. The thrust Friday had it close at the high of the week after a full on trend higher day.

The daily chart shows the Bollinger Bands® have squeezed in and showed signed of opening to the upside. The RSI is level in the bullish zone with room to move higher, while the MACD has crossed up and is positive. There is also now a Golden Cross. These are some positive characteristics in the consolidation environment on this timeframe.

On the weekly chart price continues to move up towards the June top and near the February gap. The RSI is moving higher, but remains short of the bullish zone, with the MACD rising and positive. There is resistance above at 318.50 and 320 then 325 and 332. Support lower comes at 313.50 and 309.50 then 305.50 and 302.50 before 300. Possible Resumption of Uptrend.

SPY Weekly, $SPY

Heading into July Options Expiration the equity markets are showing renewed strength. Elsewhere look for Gold to continue its uptrend while Crude Oil consolidates over support. The US Dollar Index continues to drift to the downside while US Treasuries possibly may be resuming their uptrend. The Shanghai Composite looks to continue the drive higher while Emerging Markets also move to the upside.

The Volatility Index looks to remain elevated, but moving lower, making the path easier for equity markets to the upside. Their charts look strong on both timeframes with the exception of the small caps. The QQQ is leading the charge on both timeframes as it seems to set new all-time highs every day. The SPY had a strong finish to the week and looks ready to break higher as well. The IWM however remains stuck in consolidation on both timeframes. Use this information as you prepare for the coming week and trad’em well.

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