SPY Trends and Influencers October 10, 2020

Last week’s review of the macro market indicators saw as the 4th Quarter began, equity markets were hinting at a rebound from an ugly September. Elsewhere looked for Gold ($GLD) to continue its short term move higher while Crude Oil ($USL) consolidated in a broad range. The US Dollar Index ($DXY) looked to be reversing to the upside while US Treasuries ($TLT) drifted lower in consolidation. The Shanghai Composite ($ASHR) looked to continue in consolidation while Emerging Markets ($EEM) consolidated under long term resistance. 

The Volatility Index ($VXX) looked to remain in moderate territory not really hurting or making it easier for equity markets to the upside. Their charts looked stronger on the longer timeframe, reversing off of the downtrend. On the shorter timeframe the $IWM was breaking a bull flag to the upside, leading the markets. Both the $QQQ and $SPY were stalled though and without making higher highs.

The week played out with Gold stalling and consolidating under prior support while Crude Oil bounced off of support and up towards the top of consolidation. The US Dollar reversal failed to hold and it continued lower while Treasuries gapped down to their 200 day SMA and held there. The Shanghai Composite was closed until Friday and then opened higher while Emerging Markets broke higher out of consolidation.

Volatility drifted down to a 5 week low. This made it easier on equities and they started by moving higher. A Tuesday hiccup was then recovered fully by Wednesday and they ended the week running higher. This resulted in the SPY and QQQ ending at 1 month highs and the IWM looking even stronger, breaking a range and into the February gap. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week between the 20 and 50 day SMA’s and looking like it may be stalling at a lower high. It moved higher Monday though to continue the move up. Tuesday saw a good start destroyed after a Trump tweet about no new stimulus until after the election as it gave up all of Monday’s gains. But by Wednesday the mood had shifted and it was moving higher again. It continued through the close Friday to end the week up almost 4%.

The daily chart shows the price pushing the Bollinger Bands® open as it moves higher. The all-time high is just over 3% higher. The RSI is rising in the bullish zone as it is now over 60 again. The MACD is crossed up and positive. The weekly chart shows a near Marubozu candle higher. This bodes well for continuation next week. It also shows the second highest weekly close ever.

The RSI is rising and bullish with the MACD turning up after avoiding a cross down. There is resistance higher at 348.80 and 353 then 357.50 with a Measured Move to 375 above that. Support lower comes at 346 and 344.70 then 342.20 and 341 followed by 339.30 and 336 then 332. Uptrend Resumes.

SPY Weekly, $SPY

Heading into the October options expiration, equity markets are looking strong again. Elsewhere look for Gold to continue its short term move higher while Crude Oil consolidates in a broad range. The US Dollar Index continues to move lower while US Treasuries pullback as well. The Shanghai Composite looks to continue in consolidation over support while Emerging Markets march to the upside. The Volatility Index looks to drift lower making the path easier for equity markets to the upside.

Their charts look strong on both timeframes. On the shorter timeframe both the QQQ and SPY are breaking above the consolidation ranges following the September swoon, while the IWM is leading the pack and ready to finally attack the February high. On the longer timeframe the SPY and QQQ are closing in on their all-time highs while the IWM may join them soon. Use this information as you prepare for the coming week and trad’em well.

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