SPY Trends and Influencers February 6, 2021

• Posted by Greg Harmon
• on February 6th, 2021

Last week’s review of the macro market indicators saw that after a Santa Claus Rally and the first 5 days of January going higher, the trifecta failed to hit as the month of January ended lower. Now that January was in the books, equity markets were showing signs of tiring in their run higher. Elsewhere looked for Gold ($GLD) to continue its pullback while Crude Oil ($USL) consolidated in the uptrend. The US Dollar Index ($DXY) consolidated in the downtrend while US Treasuries ($TLT) paused in their downtrend.

The Shanghai Composite ($ASHR) and Emerging Markets ($EEM) looked to continue the pullbacks in their respective uptrends. The Volatility Index ($VXX) was rising causing headwinds for the equity markets to the upside. Their charts remained strong on the longer timeframe but extended. On the shorter timeframe the $SPY, the $IWM and the $QQQ were retrenching. There was no major damage yet, but the SPY leading to the downside might be the primary indicator in the week.

The week played out with Gold accelerating to the downside while Crude Oil broke out over resistance and continued higher. The US Dollar started to shift upward out of consolidation while Treasuries resumed their move down to a 10 month low. The Shanghai Composite pulled back to wards a retest of the break out at the beginning of the year while Emerging Markets reversed toward a retest of the all-time high.

Volatility quickly fell back towards the December low. This took the pressure off equities and they responded by moving higher. The IWM was first, moving higher all week. The SPY and QQQ started higher but paused midweek before ending with another run up. All three finished at new all-time highs. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY was pulling back from an all-time high as the week started. But it was also at the lower Bollinger Band® and 50 day SMA. The latter two proved to be dominant and the price broke to the upside Monday. It continued to move higher all week printing a new all-time high Thursday and then again to close the week. The daily chart shows the Bollinger Bands starting to open higher with the RSI rising in the bullish zone. The MACD is crossing up and positive as well.

The only sour point on the daily chart is the Hanging Man candle from Friday. On the weekly chart it printed a long white candle erasing the prior red candle. The RSI is rising and bullish with the MACD turning back up and avoiding a cross down. There is no resistance higher. Support lower comes at 385 and 381.25 then 375.50 and 372.50 before 369 and 364.50. Uptrend.

SPY Weekly, $SPY

Heading into the second week of February, equity markets showed resilience as they rebounded from end of January sell off. Elsewhere look for Gold to continue its pullback while Crude Oil resumes its uptrend. The US Dollar Index may be rounding out a bottom towards a reversal while US Treasuries continue in their downtrend. The Shanghai Composite looks to continue the pullback in the uptrend while Emerging Markets ready to attack new all-time highs.

The Volatility Index looks to have settled back to low levels making the path easier for equity markets to the upside. Their charts look strong, especially on the longer timeframe. On the shorter timeframe both the QQQ and SPY did print indecision candles which may influence the short term. The IWM looks ready to take the lead with a new leg higher. Use this information as you prepare for the coming week and trad’em well.

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