SPY Trends and Influencers April 4, 2020

• Posted by Greg Harmon
• on April 4th, 2020

Last week’s review of the macro market indicators saw, with only 2 trading days left in the 1st Quarter, equity markets sat in bear market territory even after what were some new bull market qualifying bounces. Elsewhere looked for Gold ($GLD) to continue its consolidation in the uptrend while Crude Oil ($USO) moved toward 20 year lows. The US Dollar Index ($DXY) continued to whipsaw with a short term downtrend while US Treasuries ($TLT) consolidated in their uptrend.

The Shanghai Composite ($ASHR) looked to continue the short term drift higher while Emerging Markets ($EEM) continued towards the lows.  The Volatility Index ($VXXY) looked to remain extreme making the path filled with craters for equity markets. Their charts looked solid in the short term after strong moves higher, but with a large swath of traders anticipating the reversal from a bear market rally anytime. The longer charts showed a sold reversal, and follow through could sway a lot of opinions (read money).

The week played out with Gold pulling back into mid week and then reversing and recovering most of the drop while Crude Oil found support and raced higher late in the week. The US Dollar found support and reversed back higher while Treasuries moved slightly higher. The Shanghai Composite digested the move up building a flag while Emerging Markets moved in a tight range in place.

Volatility moved lower slowly, but remained at extreme levels. This did little to ease any pressure on equities and they held in place early in the week. All gapped down Wednesday without recovering the move lower late in the week. This resulted in the SPY and QQQ ending at their 20 day SMA’s with the IWM noticeably below it. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week sitting just below a 38.2% retracement of the drop from the all-time high to the March low, and below the 20 day SMA. It held there through Tuesday to close the 1st Quarter. Wednesday it gapped down and then held there for the rest of the week, still under the 20 day SMA. The daily chart shows the RSI turning level under the mid line, still in the bearish zone, with the MACD rising but still negative.

It was a relatively quiet week. The weekly chart shows the smaller body candle at the top of last week’s. The RSI is stalling as it moved out of oversold territory with the MACD dropping. There is support lower at 248 and 244 then 240 and 237 before 232. Resistance higher comes at 250 and 252.50 then 256 and 260 before 263.50. Bounce in Downtrend Rolling Over.

SPY Weekly, $SPY

A week with record unemployment filings and a non-farm payroll report that ended a 10 year streak of adding jobs, equity markets showed resilience on the mid to large cap side, not so much for the small caps. Elsewhere looks for Gold to continue to move higher while Crude Oil reverses to the upside to join it. The US Dollar Index is also moving to the upside while US Treasuries push back towards all-time highs. The Shanghai Composite looks to consolidate in a broad range while Emerging Markets head lower.

The Volatility Index is settling back lower but remains at very high levels, keeping the pressure on equity markets. Their charts all reversed from the bounce last week with the IWM showing the weakest performance, renewing the downtrend. The SPY and QQQ moved lower but both had their narrowest range since before the drop began in mid-February, perhaps showing signs of growing clarity. Use this information as you prepare for the coming week and trad’em well.

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