SPY Trends and Influencers August 21, 2021

Last week’s review of the macro market indicators saw equity markets were a mixed bag as the market moved into the low volume dog days of August. Elsewhere looked for Gold ($GLD) to continue its bounce in the pullback while Crude Oil ($USL) consolidated in a tight range. The US Dollar Index ($DXY) continued to consolidate after the move to the upside while US Treasuries ($TLT) might have resumed their uptrend. The Shanghai Composite ($ASHR) looked to consolidate while Emerging Markets ($EEM) continued to pullback toward long term support.

The Volatility Index ($VXX) looked to remain very low making the path easier for equity markets to the upside. The charts of the $SPY and the $QQQ both looked great on the longer timeframe with the SPY also looking good for more highs in the short run. The QQQ looked to continue to pause and digest at its highs. The $IWM continued to look like the party pooper, stuck in a long flat consolidation that was nearing 8 months long without any change in sight.

The week played out with Gold meeting resistance and shifting into consolidation while Crude Oil continued the short term move lower and out of the consolidation zone. The US Dollar pulled back to support and then reversed to a new high while Treasuries confirmed their move to the upside. The Shanghai Composite consolidated before falling to an August low while Emerging Markets broke down through prior long term resistance, not offering support.

Volatility spiked early and then fell back late in the week, ending back in the teens. This put initial pressure on equities and they responded by moving lower through Thursday morning. All found support by Thursday afternoon with the SPY and QQQ reversing to finish the week near the highs. The IWM remained weak though failing to move higher after finding support. 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 alltime high. It continued higher Monday with a pick up in volume. Tuesday saw a reversal though and continuation Wednesday down through the 20 day SMA. Thursday brought a gap down open at the lower of the Bollinger Bands® but movement higher all day and it followed with an up day Friday. This had the SPY slightly lower on the week and back over the 20 day SMA. The daily chart shows a pullback in the RSI reversing at the midline and the MACD leveling in positive territory after a reset lower. There was no real damage done but now watching the tightening Bollinger Bands.

The weekly chart printed a Hanging Man candle, a possible reversal. It is holding well above the 20 week SMA with the Bollinger Bands slowly squeezing in. The RSI on this timeframe is strong and slightly into overbought territory with the MACD flat at a strong bullish level. There is resistance higher at 446 and 447 with the 200% extension of the retracement of the pandemic drop above at 458. Support lower comes at 441 and 437 then 435.50 and 430.50 before 428.50 and 425.50. Uptrend.

SPY Weekly, $SPY

With August monthly options expiration in the books, equity markets tackled their 4th monthly expiration week dip and ended the week moving back up. Elsewhere look for Gold to continue to consolidate while Crude Oil pulls back. The US Dollar Index continues to move to the upside while US Treasuries also work in an uptrend. The Shanghai Composite looks to pullback in consolidation while Emerging Markets trend lower.

The Volatility Index looks to remain low making the path easier for equity markets to the upside. Their charts look mixed on the shorter timeframe with the SPY and QQQ driving back towards their alltime highs while the IWM holds at the bottom of a long consolidation range. The longer timeframe shows the SPY strong and trending higher with the QQQ in a short consolidation at the top and the IWM stuck in that long consolidation. Use this information as you prepare for the coming week and trad’em well.

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