SPY Trends and Influencers August 22, 2020

• Posted by Greg Harmon
• on August 22nd, 2020

Last week’s review of the macro market indicators saw heading into the August options expiration, equity markets had hit a speed bump and stalled. Elsewhere looked for Gold ($GLD) to continue to consolidate the uptrend while Crude Oil ($USL) slowly rose in consolidation. The US Dollar Index ($DXY) marked time as it digested the recent drop while US Treasuries ($TLT) pulled back in their uptrend. The Shanghai Composite ($ASHR) looked to continue to consolidate in its uptrend while Emerging Markets ($EEM) paused over resistance in their own move higher. 

The Volatility Index ($VXX) looked to continue the slow creep lower making the path easier for equity markets to the upside. Their charts looked strong on the longer timeframe, but with some indecision candles on the week suggesting a pause or digestion possible. On the shorter timeframe the $IWM, $QQQ and $SPY looked to be in consolidation mode for the time being.

The week played out with Gold bouncing early but then settling back a little lower while Crude Oil remained in the range until settlement related spikes down Thursday and Friday. The US Dollar continued to move sideways while Treasuries drifted to the upside. The Shanghai Composite met resistance at the July top and reversed while Emerging Markets continued to move in a narrow range, consolidating.

Volatility was subdued with a small move higher Thursday reversed Friday to end little changed. This allowed equities to begin the week moving higher. The QQQ continued higher all week to make 4 new all-time highs, with Wednesday the only exception. The IWM lost power after Monday and languished before a move lower Friday. The SPY Also ran higher, but gave up all of the gains Wednesday after retesting the all-time high. It finished up on the week though with a rebound Friday. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week drifting slowly higher and near the all-time high. It continued to move up early, making a new all-time high close on Tuesday. Wednesday saw a pullback and it started lower Thursday as well until an intraday recovery. Then Friday saw it move higher again and set another new all-time high close. The daily chart shows the RSI is cruising sideways along the edge of overbought in the bullish zone with the MACD flat and positive. The Bollinger Bands® are still pointed higher with some room above to the top now.

The weekly chart shows the Bollinger Bands opening to the upside and price driving higher. The RSI is moving higher in the bullish zone, well short of the prior top, with the MACD rising and reaching prior extreme levels. There is no resistance above 339.75 but the 138.2% extension of the February move lower would be to 385.35 and the 161.8% extension is to 413.75. Support lower comes at 336 and 332 then 327 and 324 before 320. Uptrend.

SPY Weekly, $SPY

With the August options expiration in the past, equity markets showed some divergence, with the small caps moving lower while the S&P 500 and Nasdaq 100 set all-time highs. Elsewhere look for Gold to continue to consolidate in the uptrend while Crude Oil slowly drifts higher in consolidation. The US Dollar Index pauses in consolidation while US Treasuries consolidate in their uptrend. The Shanghai Composite looks to consolidate over support while Emerging Markets consolidate in their uptrend.

The Volatility Index looks to continue the slow drift lower making the path easier for equity markets to the upside. Their charts are mixed though, with the SPY and QQQ looking strong on both timeframe. The IWM is building a bull flag on the shorter timeframe and showing a reversal on the longer chart. Use this information as you prepare for the coming week and trad’em well.

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