SPY Trends and Influencers April 10, 2021

Last week’s review of the macro market indicators saw with the first Quarter of 2021 in the books, equity markets were painting a mixed picture, but broadly positive. Elsewhere looked for Gold ($GLD) to possibly reverse out of consolidation to the upside while Crude Oil ($USL) paused in its uptrend. The US Dollar Index ($DXY) continued in the short term uptrend while US Treasuries ($TLT) were pausing in their downtrend, and possibly reversing higher. The Shanghai Composite ($ASHR) was also looking at a possible reversal to the upside while Emerging Markets ($EEM) pulled back in their uptrend.

The Volatility Index ($VXX) looked to remain very low and possibly move lower, making the path easier for equity markets to the upside. Their charts looked strong on the longer timeframe, led by the $SPY. There looked to be a rotation going back into the $QQQ as the $IWM marked time. On the shorter timeframe both the QQQ and IWM lagged the SPY again with the IWM looking stronger than the QQQ on this scale.

The week played out with Gold pushing to the upside but meeting profit taking Friday and dropping back while Crude Oil continued in consolidation, narrowing the range late in the week. The US Dollar pulled back after making a higher high while Treasuries continued their consolidation in a possible rounding bottom. The Shanghai Composite consolidated over prior resistance, now support, while Emerging Markets held in a tight range under the last high.

Volatility drove to a new 52 week low, continuing to move back into pre-pandemic territory. This gave a tailwind to equities and they responded by starting the week moving higher. The SPY and QQQ continued to rise all week, with the SPY making new all-time highs. The IWM however, reversed to the downside Tuesday and ended the week lower. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week at an all-time high and over 400 for the first time. It could not wait for Monday to come and opened with a big gap up and ran higher. It held there through Wednesday and then moved higher again Thursday before a strong close to the week Friday. In all 4 new all-time highs for the week including the weekly close Friday.

Bears will no doubt point out the gap that has been left behind on the daily chart and dismiss the Marubozu candle Friday. The RSI has risen into overbought territory, but mildly, with the MACD rising and bullish, well below prior peaks. The Bollinger Bands® are opening to the upside boding for higher prices still.

The weekly chart shows a push outside of the tight Bollinger Bands and a close near the 161.8% extension of the retracement of the drop from the pandemic. There is no resistance higher, but a target on a Measured Move to 458, which coincides with a 200% retracement. Support lower comes at 408 and 407 then 403.50 and 400.70 before 397 and 395 then 393 and 389. Uptrend.

SPY Weekly, $SPY

Heading into April options expiration and earnings season, equity markets continue to show strength with the large cap stocks leading the way. Elsewhere look for Gold to continue its short term move to the upside while Crude Oil continues to consolidate its long move higher. The US Dollar Index may continue to pullback in its uptrend while US Treasuries bounce in their downtrend. The Shanghai Composite looks to consolidate in its uptrend while Emerging Markets digest lower after their move higher.

The Volatility Index looks to remain very low making the path easier for equity markets to the upside. Their charts look strong, especially on the longer timeframe with the SPY leading the way then the QQQ rebounding and the IWM holding. On the shorter timeframe both the QQQ and SPY look strong as they move into new highs while the IWM continues its consolidation. Use this information as you prepare for the coming week and trad’em well.

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