SPY Trends and Influencers December 4, 2021

Last week’s review of the macro market indicators saw with 2 trading days left in November, equity markets were showing some degree of weakness in the short term. Elsewhere looked for Gold ($GLD) to consolidate after a pullback while Crude Oil ($USL) pulled back from multi-year highs. The US Dollar Index ($DXY) continued to trend to the upside while US Treasuries ($TLT) consolidated. The Shanghai Composite ($ASHR) looked to continue in broad consolidation while Emerging Markets ($EEM) extended losses in a downtrend.

The Volatility Index ($VXX) looked to remain elevated making the path more difficult for equity markets to the upside. Their charts remained mixed with the $SPY and $QQQ stronger than the $IWM. For the strong ones, they continued to look stronger on the longer timeframe. On the shorter timeframe both the QQQ and SPY were resetting momentum measures and at risk for more pullback. The IWM was right in the middle of the longer term consolidation covering all of 2021, but in a downtrend on the daily chart. The Hammer candle on the gap down to end the week could show us that the worst was over after more than an 8% drop.

The week played out with Gold moving lower while Crude Oil may have found a bottom and reversed at the end of the week. The US Dollar found support in the short term pullback and reversed while Treasuries broke through resistance to 10 month highs. The Shanghai Composite moved higher in the consolidation zone while Emerging Markets made a weak bounce and then fell back.

Volatility moved slightly higher, maintaining the elevated levels. This continued to add pressure on equities and they moved lower. All ended at or near the lows of the week. This resulted in the SPY and QQQ ending off nearly 5% and 7% from the all-time highs of 2 weeks ago with the IWM approaching a test of support of the 10 month channel. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY entered the week pulling back from a plateau at the all-time high. It moved higher Monday to fill a gap and then reversed lower Tuesday. Wednesday saw a gap up open sold all day long to end at a 5 week low and was followed by a bounce Thursday. Friday saw another gap up sold with buyers showing up in the last hour.

The price action has been oscillating around the 200% extension of the retracement of the pandemic drop and the 50 day SMA. The daily chart shows the RSI on the cusp of a move into the bearish zone with the MACD dipping into negative territory.

The weekly chart shows it holding over the 20 week SMA after a second red week. This is where the price bottomed in the September swoon. The RSI is pulling back but above the midline with the MACD crossed down but positive. There is support at 450 and 447 then 444 and 441 before 437.50 and 436. Resistance higher sits at 454 and 457 then 460 and 463.60 before 466. Pullback in Uptrend.

SPY Weekly, $SPY

With only 4 weeks of trading left in 2021, equity markets are showing some weakness. Elsewhere look for Gold to consolidate while Crude Oil pulls back. The US Dollar Index continues to trend to the upside while US Treasuries renew their uptrend. The Shanghai Composite looks to consolidate in a broad range while Emerging Markets continue to move lower. The Volatility Index looks to remain elevated making building strong headwinds for equity markets.

Their charts remain mixed with the SPY and QQQ strong on the longer timeframe but with building weakness in pullbacks on the shorter one. The IWM is weak on both timeframes and testing support after a failed break and reversal. It brings to mind the trader adage of “from failed moves come fast moves”. Use this information as you prepare for the coming week and trad’em well.

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