SPY Trends and Influencers September 5, 2020

Last week’s review of the macro market indicators saw with one trading day left in August, equity markets had put up stellar returns on the month despite the hot lazy summer weather. Elsewhere looked for Gold ($GLD) to consolidate in its uptrend while Crude Oil ($USL) continued to slowly drift higher. The US Dollar Index ($DXY) continued to move to the downside while US Treasuries ($TLT) might be breaking consolidation to the downside.

The Shanghai Composite ($ASHR) looked to move higher in consolidation while Emerging Markets ($EEM) moved up out of consolidation.  The Volatility Index ($VXX) looked to continue to run flat in the February gap 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 $QQQ and $SPY could us a reset on momentum measures as both were extended. The $IWM might be ready to break its bull flag to the upside.

The week played out with Gold attempting to push higher but failing quickly and falling back while Crude Oil fell back to the low end of consolidation late in the week. The US Dollar Index made a short term bottom and reversed in consolidation while Treasuries marched higher until profit taking hit Friday. The Shanghai Composite consolidated until Friday when it dropped back below the 20 day SMA while Emerging Markets met resistance and pulled back to support.

Volatility inched higher early in the week and then gained speed to end the week back approaching the June high. This put pressure on equities and they responded with a 2 day dump to end the week. This resulted in the QQQ dropping more than 10% and the SPY and IWM more than 6% before rebounding late Friday. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week after making new all-time highs every day the prior week. It paused Monday and then continued the path higher Tuesday and Wednesday with new all-time highs. Things change Thursday though and the SPY dropped over 3.7%, the worst day since June 11th. It continued lower Friday, dipping below the February high, before a late day rally.

It ended the week more than 4% off of the high, but printing a Hammer reversal candle. The daily chart shows that it nearly managed to retake the 20 day SMA at Friday’s close, falling just 4 pennies short. The RSI is pulling back and now near the mid line. The MACD is crossed down and falling but remains positive. On the weekly chart it printed an outside week, a possible reversal signal. But this candle also has long shadows above and below signaling indecision.

The Bollinger Bands® remain moving higher for now. The RSI is strong in the bullish zone, but could be making a lower high, while the MACD continued to plow higher. There is resistance at 344.70 and 350.80 then 352.75. Support lower comes at 342.20 and 341 then 339.30 and 336 before 332 and 327. Pullback in Uptrend.

SPY Weekly, $SPY

Wrapping up August and heading into the unofficial end of summer, equity markets finally ran out of gas and pulled back. Elsewhere look for Gold to continue in consolidation while Crude Oil possibly moves to a downtrend. The US Dollar Index is moving to the upside possibly out of consolidation while US Treasuries consolidate. The Shanghai Composite looks to consolidate as well while Emerging Markets pause in their uptrend.

The Volatility Index looks to push up towards the June highs making the road rough for equity markets. Their charts are showing possible reversals or at least indecision on the longer timeframe. On the shorter timeframe the IWM, the QQQ and SPY ended the week with possible reversal candles though adding confusion to the story. Use this information as you prepare for the coming week and trad’em well.

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