SPY Trends and Influencers August 10, 2024

Last week, the review of the macro market indicators saw with the July FOMC meeting in the books, equity markets showed cause for concern with a very weak end to the week following weak employment data. Elsewhere looked for Gold ($GLD) to continue its assault on new highs while Crude Oil ($USO) looked to break consolidation lower. The US Dollar Index ($DXY) continued the short term move to the downside while US Treasuries ($TLT) were possibly ready to reverse to an uptrend.

The Shanghai Composite ($ASHR) looked to continue the short term move lower while the short term breakout higher in Emerging Markets ($EEM) was at risk of failing. The Volatility Index ($VXX) looked to remain elevated and rising making the path easier for equity markets to the downside. The charts of the $SPY and $QQQ continued to look productive on the longer timeframe but with continued weakness on the shorter timeframe. The $IWM looked to have given traders another disappointment with yet another failed breakout higher.

The week played out with Gold pulling back from the new high early but finding support midweek and reversing while Crude Oil found support Monday and reversed higher. The US Dollar plunged to a 7 month low Tuesday before bouncing higher while Treasuries saw a blow off top Monday lead to a fallback to retest the breakout. The Shanghai Composite fell to a 6 month low Monday and then consolidated there while Emerging Markets opened with a gap down to ta 6 month low before recovering by week’s end.

Volatility spiked Monday to levels not seen since March of 2020 and then fell back to the low 20’s to end the week. This put initial pressure on equities and they responded by starting the week with large gap down and go move Monday. They recovered the drop by the open Wednesday only to drive lower all that day and then reverse Thursday. Friday saw a much tighter range and they ended the week little changed despite two sessions with moves over 2% amid a narrative of recession fears. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week in a pullback on the daily chart that had touched the 100 day SMA for the first time since November 2023. It was not done though as it gapped down Monday below the 150 day SMA and finally found support. It rose intraday and continued higher Tuesday filling the gap. Wednesday saw it fall back again and hold over the 150 day SMA before a 2 day move to the upside left it unchanged on the week. The RSI bounced off oversold, consistent with the past 4 touches there, and the MACD is curling back higher but negative.

This was the deepest pullback since the 2022 drop but held short of a 10% decline. The weekly chart shows a near Marubozu candle ending back over the 50 week SMA. If this reversal holds up it will be a higher low, continuing the uptrend. The RSI is holding in the bullish zone on the pullback with the MACD crossed down and positive. There is resistance at 534 and 537 then 540 and 542 before 545.75 and 549.50. Support lower sits at 530 and 524.50 then 520.50 and 517.50 before 513.50 and 510. Pullback in Uptrend.

SPY Weekly, $SPY

With the first week of August in the books, equity markets showed resilience with a rebound from an ugly start induced by growing narrative of recessionary fears. Elsewhere look for Gold to continue its uptrend while Crude Oil consolidates in a narrowing range. The US Dollar Index continues to drift in broad consolidation while US Treasuries consolidate in their downtrend. The Shanghai Composite looks to continue the short term trend lower while Emerging Markets consolidate under long term resistance.

The Volatility Index looks to have settled after a spike to 4 year highs removing the pressure on equity markets for now. The SPY and QQQ ETF charts continue to look strong on the longer timeframe. On the shorter timeframe both the QQQ and SPY have reset on momentum measures but also have a lot of upside work to put in before they are looking strong. The IWM is now just in consolidation mode again after a failed break higher. Use this information as you prepare for the coming week and trad’em well.

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