SPY Trends and Influencers December 12, 2020

• Posted by Greg Harmon
• on December 12th, 2020

Last week’s review of the macro market indicators saw with just 18 trading days left in the year, equity markets were seemingly starting to sprint to the finish. Elsewhere looked for Gold ($GLD) to continue its short term move higher in the pullback while Crude Oil ($USL) slowly drifted higher. The US Dollar Index ($DXY) continued to make new lows while US Treasuries ($TLT) continued in their downtrend.

The Shanghai Composite ($ASHR) looked to be primed to push through resistance higher while Emerging Markets ($EEM) continued their uptrend. The Volatility Index ($VXX) looked to continue to close the February gap lower making the path easier for equity markets to the upside. Their charts looked strong, especially on the longer timeframe. On the shorter timeframe both the $QQQ and $SPY were taking smaller steps higher as the $IWM was leading the charge.

The week played out with Gold pushing to the upside early but quickly meeting resistance and dropping back while Crude Oil continued the drift with a push up Thursday maybe adding momentum. The US Dollar found support in its pullback and held while Treasuries reversed higher, bouncing off of the lows. The Shanghai Composite disappointed, pulling back from resistance a third time while Emerging Markets consolidated at the new highs.

Volatility rose up off of support at the 9 month lows mid week, but remained within normal levels. This put initial pressure on equities and they responded by moving lower. The IWM found support by Wednesday and reversed to finish the week higher. The QQQ also found support Wednesday but stuck there, down on the week. The SPY paused midweek and then dropped again Friday, also lower on the week. 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 all-time high and rising. It printed an inside doji Monday and followed that with a bullish engulfing candle to a new high Tuesday. But it could not hold up and started lower Wednesday. It continued lower through Friday, touching the 20 day SMA for the first time since the beginning of November. The daily chart shows the RSI pulling back from overbought with the MACD crossing down but positive. The Bollinger Bands® are pointing higher and are tight.

The weekly chart shows an inside week on the real body and a move back inside the rising Bollinger Bands. The RSI is holding in the bullish zone with the MACD rising and getting to extreme levels. There is no resistance above 370 but the target to 390 out of the symmetrical triangle. Support lower sits at 364.50 and 360 then 358 and 356 before 353. Pause in Uptrend.

SPY Weekly, $SPY

Heading into December options expiration and the last full week of trading this year, equity markets have tapped the brakes after strong moves higher. Elsewhere look for Gold to continue its pullback while Crude Oil pushes slowly to the upside. The US Dollar Index continues to drift lower while US Treasuries continue to trend lower. The Shanghai Composite looks to have fallen back into broad consolidation while Emerging Markets trend higher.

The Volatility Index looks to remain low but with a bias toward rising putting an obstacle in the path for equity markets to the upside. Their charts continue to look strong, especially on the longer timeframe. On the shorter timeframe both the QQQ and SPY have started what are now minor pullbacks with the IWM holding tough at the highs in consolidation. Use this information as you prepare for the coming week and trad’em well.

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