SPY Trends and Influencers August 12, 2023

Two weeks ago, the review of the macro market indicators saw with one trading day left in July, equity markets showed resilience holding up and improving in a week with rate hikes from Fed and ECB and slight loosening of the band for rates in Japan. Elsewhere looked for Gold ($GLD) to continue its pullback while Crude Oil ($USO) consolidated in the top of broad range. The US Dollar Index ($DXY) continued to bounce in the downtrend while US Treasuries ($TLT) continued their trend lower.

The Shanghai Composite ($ASHR) looked to continue the pullback in broad consolidation while Emerging Markets ($EEM) continued a short term move higher. The Volatility Index ($VXX) looked to remain very low and stable making the path easier for equity markets to the upside. Their charts continued to look strong on the longer timeframe. On the shorter timeframe both the $QQQ and $IWM looked to continue in sideways channels while the $SPY resumed the trend higher.

The week played out with Gold drifting lower to support while Crude Oil continued to the top of consolidation, printing a 9 month high along the way. The US Dollar continued in the bounce higher, but short of a new higher high, while Treasuries fell back toward the August low. The Shanghai Composite stalled at resistance and fell back while Emerging Markets met resistance and dropped back.

Volatility rose slightly and held in the mid teens. This put slight pressure on equities and they responded by moving lower. All did so in a choppy trend. This resulted in the SPY, the QQQ and the IWM all breaking below their 20 day SMA’s for the first time in several months and the QQQ breaking its 50 day SMA. Is this just a healthy reset or more? What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week pulling back from a top at the end of July. It continued to move lower all week on the daily chart ending just above the 50 day SMA with the Bollinger Bands® opening to the downside. The RSI is dropping and below the midline in the bullish zone with the MACD falling but positive.

The weekly chart shows a 2 week move lower, bringing price back towards the 20 week SMA. The RSI on this timeframe is resetting lower from overbought with the MACD turning toward a cross down. There is support lower at 444 and 437.50 then 435.50 and 430 before 428.50. Resistance higher sits at 447 and 451 then 454 and 457 before 460. Pullback in Uptrend.

SPY Weekly, $SPY

Heading into the August options expiration, equity markets continue to show short term weakness fitting with the seasonal pattern. Elsewhere look for Gold to continue its pullback while Crude Oil in on the verge of a breakout higher with strong momentum. The US Dollar Index continues a short term move to the upside while US Treasuries pullback. The Shanghai Composite looks to continue the pullback in consolidation while Emerging Markets consolidate.

The Volatility Index looks to remain low and better to the downside making the path easier for equity markets to the upside. The charts of SPY and QQQ look strong on the longer timeframe with the IWM in a broad consolidation. On the daily timeframe the IWM, the QQQ and the SPY all look messier with a bias lower short term. Use this information as you prepare for the coming week and trad’em well.

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