SPY Trends and Influencers September 19, 2020

• Posted by Greg Harmon
• on September 19th, 2020

Last week’s review of the macro market indicators saw with a second week of movement lower and heading into the September options expiration, equities were trying to catch their breath but looking weak. Elsewhere the word was consolidation. It looked for Gold ($GLD) to continue its consolidation while Crude Oil ($USL) broke consolidation lower. The US Dollar Index ($DXY) continued to consolidate after the drop while US Treasuries ($TLT) moved sideways.

The Shanghai Composite ($ASHR) looked to continue an intermediate consolidation while Emerging Markets ($EEM) consolidated under long term resistance.  The Volatility Index ($VXX) looked to resume a drift lower making the path easier for equity markets to the upside. Their charts still looked at risk though, especially on the longer timeframe. On the shorter timeframe both the $QQQ and $SPY were in consolidation after a drop while the $IWM was looking the weakest in a pullback.

The week played out with Gold holding at resistance and holding at a lower high while Crude Oil moved back up to the prior channel. The US Dollar drifted lower in a tight range while Treasuries also remained in consolidation. The Shanghai Composite met resistance and held until a push higher Friday while Emerging Markets retested the August high and held there.

Volatility found support and held in a tight range near support all week. This allowed equities to bounce initially and they started the week with a 2 day move lower. All found opened higher Wednesday but reversed to finish lower. They all gapped down Thursday and held. This resulted in the SPY, IWM and QQQ ending back near the lower end of the recent consolidation. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week holding at support after a drop, and printing a Hammer candle, a possible reversal. It did reverse higher Monday and continued through the open Wednesday. But it could not hold up and fell back through the day Wednesday. It gapped down Thursday to the 50 day SMA, a spot it had not been since April and rebounded. But Friday it crossed below it and ended at a 6 week low. The daily chart shows the RSI on the verge of a move into the bearish zone with the MACD now negative and falling.

The weekly chart shows the RSI pulling back from a lower higher in the bullish zone, but with the MACD pulling back from a higher high, indecision. There remains an open gap to 326.63 below. There is support at 327 and 324 then 320 and 318.50. Resistance comes at 332 and 336 then 339.30 and 341 before 342.20. Pullback in Uptrend.

SPY Weekly, $SPY

September Options expiry has ended and equity markets pulled back after an early start higher. Elsewhere look for Gold to consolidate in its uptrend while Crude Oil moves higher in the short term. The US Dollar Index looks to continue to consolidate the recent drop while US Treasuries mark time after pulling back slightly in their uptrend. The Shanghai Composite looks to remain in broad consolidation while Emerging Markets consolidate under long term resistance.

The Volatility Index looks to continue the broad trend drifting lower making the path easier for equity markets to the upside. Their charts look weak though, especially the QQQ and SPY. Both are moving lower in both timeframes. The IWM is outperforming both, stable in the short run, and rising in the longer timeframe. Use this information as you prepare for the coming week and trad’em well.

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