SPY Trends and Influencers August 15, 2020

Last week’s review of the macro market indicators saw with the first week of August in the books, the dog days of summer were nowhere to be found. Instead equities were finding renewed strength as they moved higher. Elsewhere looked for Gold ($GLD) to continue higher while Crude Oil ($USL) consolidated in a slow drift up. The US Dollar Index ($DXY) looked to consolidate the move lower while US Treasuries ($TLT) paused in their uptrend. The Shanghai Composite ($ASHR) looked to continue the short term move higher while Emerging Markets ($EEM) continued to consolidate. 

The Volatility Index ($VXX) looked to continue to drift lower 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 $IWM and $SPY also looked strong and ready for more upside. The $QQQ, with profit taking, might see some rotation out into the other 2 ETF’s.

The week played out with Gold pulling back hard early in the week and then holding while Crude Oil continued to drift higher in consolidation in a tight range. The US Dollar also remained in consolidation while Treasuries pulled back to 1 month lows. The Shanghai Composite continued to mark time moving sideways over support while Emerging Markets had a similar week, holding over support.

Volatility leveled out against support but also dropping the high end of the daily range. This creates an environment to remove pressure on equities, and they responded in mixed fashion, uncharacteristically of how they have been reacting lately. The SPY moved higher before a mid week swoon was erased. The IWM also ran higher early then saw profit taking. The QQQ started heading lower before a reversal to end the week little changed. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week moving higher and just under a full retracement of the drop from the all-time high in February to the March low.  Monday saw it continue higher but it had a setback on Tuesday. Wednesday saw another push higher, stop just short of the prior higher. It held there Thursday and then ending Friday with a late day sell off.

As the dust settled it did not quite make it to the prior high but finished slightly up on the week. The daily chart shows the RSI holding strong in the bullish zone, avoiding overbought territory. The MACD is flat and positive, far from an extreme. The Bollinger Bands® continue to move higher with price riding the top and the SMA’s rising in parallel.

The weekly chart shows promise for further upside. The price is pausing with a star print this week as it nears the all-time high. The RSI on this timeframe continues to move higher with the MACD rising and approaching the February top. There is no resistance above 339. Support lower comes at 332 and 327 then 324 and 320 before 318.50. Pause in Uptrend.

SPY Weekly, $SPY

Heading into the August options expiration, equity markets hit a speed bump and have stalled. Elsewhere look for Gold to continue to consolidate the uptrend while Crude Oil slowly rises in consolidation. The US Dollar Index marks time as it digests the recent drop while US Treasuries pullback in their uptrend. The Shanghai Composite looks to continue to consolidate in its uptrend while Emerging Markets pause over resistance in their own move higher.

The Volatility Index looks to continue the slow creep lower making the path easier for equity markets to the upside. Their charts look strong on the longer timeframe, but with some indecision candles this week suggesting a pause or digestion possible. On the shorter timeframe the IWM, QQQ and SPY look to be in consolidation mode for the time being. Use this information as you prepare for the coming week and trad’em well.

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