SPY Trends and Influencers August 3, 2024

• Posted by Greg Harmon
• on August 3rd, 2024

Last week, the review of the macro market indicators saw with three trading days left in July, large cap and tech focused index equity markets showed weakness with small caps continuing to hold strong. Elsewhere looked for Gold ($GLD) to continue its consolidation in the uptrend while Crude Oil ($USO) consolidated in a tightening range. The US Dollar Index ($DXY) continued to drift in broad consolidation while US Treasuries ($TLT) consolidated in their downtrend. The Shanghai Composite ($ASHR) looked to continue the short term move lower while Emerging Markets ($EEM) continued to hold their newfound short term uptrend.

The Volatility Index ($VXX) looked to remain low making the path easier for equity markets to the upside. This was with the backdrop of the July FOMC meeting and non-farm payroll reports in the next week among many large cap tech earnings reports. The charts of the $SPY and $QQQ looked setup for more downside on the shorter timeframe and possibly the longer timeframe as well, but with no real damage in the weekly charts yet. The prevailing narrative had been the rotation into small cap $IWM and it was showing relative strength, but more in a consolidative mode then a full thrust forward. A new high Monday could change that perspective fast.

The week played out with a lot of fireworks, but the day after the FOMC meeting. Gold pushed to new all-time highs before profit taking while Crude Oil dropped out of the consolidation to the downside. The US Dollar dropped to a 4½ month low while Treasuries jumped to 6 month highs to end the week. The Shanghai Composite continued the series of lower highs and lower lows while Emerging Markets fell back to a 3 month low.

Volatility rose up to the highest level in nearly 18 months. This put pressure on equities late and they ended the week with a large 2 day move lower. This resulted in the SPY seeing its first 2% down day and ending at 3 month lows while the QQQ ended at 3½ month lows and the IWM gave up its break out, dropping into the prior consolidation zone. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week consolidating after a pullback to the 50 day SMA on the daily chart. It held there through Tuesday and then jumped Wednesday but could not clear the 20 day SMA. It fell back Thursday and then gapped down Friday, finding support at the 138.2% extension of the retracement of the 2022 downward move. The RSI is dipping into the bearish zone with the MACD negative and falling. The Bollinger Bands® are opening lower on this chart.

The weekly chart shows a 3rd weekly candle to the downside reaching to the 20 week SMA. This is where it found support with a similar 3 week move lower in April. The RSI is pulling back towards the midline in the bullish zone with the MACD crossed down and positive. There is support lower at 530 and 524.50 then 520.50 and 517.50 before 513.50 and 510. Resistance higher is at 534 before 537 and 540 then 542 and 545.75. Pullback in Uptrend.

SPY Weekly, $SPY

With the July FOMC meeting in the books, equity markets showed concern with a very weak end to the week with weak employment data. Elsewhere look for Gold to continue its assault on new highs while Crude Oil breaks consolidation lower. The US Dollar Index continues to short term move to the downside while US Treasuries possibly reverse to an uptrend. The Shanghai Composite looks to continue the short term move lower while the short term breakout higher in Emerging Markets is at risk of failing.

The Volatility Index looks to remain elevated and rising making the path easier for equity markets to the downside. The charts of the SPY and QQQ continue to look productive on the longer timeframe but with continued weakness on the shorter timeframe. The IWM looks to have given traders yet another disappointment with yet another failed breakout higher. Use this information as you prepare for the coming week and trad’em well.

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