SPY Trends and Influencers December 19, 2020

• Posted by Greg Harmon
• on December 19th, 2020

Last week’s review of the macro market indicators saw heading into December options expiration and the last full week of trading this year, equity markets had tapped the brakes after strong moves higher. Elsewhere looked for Gold ($GLD) to continue its pullback while Crude Oil ($USL) pushed slowly to the upside. The US Dollar Index ($DXY) continued to drift lower while US Treasuries ($TLT) continued to trend lower.

The Shanghai Composite ($ASHR) looked to have fallen back into broad consolidation while Emerging Markets ($EEM) trended higher. The Volatility Index ($VXX) looked to remain low but with a bias toward rising putting an obstacle in the path for equity markets to the upside. Their charts continued to look strong, especially on the longer timeframe. On the shorter timeframe both the $QQQ and $SPY had started what were then minor pullbacks with the $IWM holding tough at the highs in consolidation.

The week played out with Gold finding support and reversing higher while Crude Oil continued the move higher. The US Dollar continued the trend lower while Treasuries pulled back from another lower high. The Shanghai Composite reversed back higher from a higher low in consolidation while Emerging Markets fell back to a higher low and then recovered throughout the week.

Volatility fell back from a Monday spike and then bounced Friday but could not hold up and ended the week a tad lower. This put initial pressure on equities and they responded by starting the week heading lower. All found support quickly and reversed Tuesday. They continued to new all-time highs Thursday before they all dropped on profit taking Friday. The SPY and QQQ ended the day with a surge of buying in the last 30 minutes to recover almost all of the drop. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week having found support at the 20 day SMA after a short pullback. It tried to move higher Monday but fell back and then marched higher 3 days in a row, making a new all-time high on Thursday. It pulled back again in some profit taking Friday but recovered most of the loss late in the day. Still, it confirmed an Evening Star reversal boding for more possible downside.

The daily chart shows price still holding over the 20 day SMA though so no real concern yet. The RSI is holding in the bullish zone with the MACD flat and positive after crossing down last week. The Bollinger Bands® remain pointing higher. The weekly chart shows a doji star print signaling indecision. The RSI on this timeframe is solidly in the bullish zone with the MACD rising as price rides the rising Bollinger Bands. There is no resistance over 372.25. Support lower comes at 364.50 and 360 then 358 and 356 before 353. Uptrend.

SPY Weekly, $SPY

With December Options Expiration in the books, and heading into the short Christmas week, equity markets look ready to end the year strong. Elsewhere look for Gold to continue its short term uptrend while Crude Oil ramps up its move higher. The US Dollar Index continues to sink while US Treasuries pullback but in a broad range. The Shanghai Composite looks to continue in broad consolidation over support while Emerging Markets continue in an uptrend.

The Volatility Index looks to remain low and drifting lower making the path easier for equity markets to the upside. Their charts also look strong, especially on the longer timeframe. On the shorter timeframe the IWM is the strongest heading higher without pause. The SPY and QQQ are flashing reversal signals, so may be in for some short term digestion. Use this information as you prepare for the coming week and trad’em well.

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