SPY Trends and Influencers January 23, 2021

Last week’s review of the macro market indicators saw heading into the Martin Luther King weekend and with January Options Expiration in the books, equity markets looked a bit tired. Elsewhere looked for Gold ($GLD) to continue its short term pullback while Crude Oil ($USL) continued to trend higher. The US Dollar Index ($DXY) was trying to bounce in the downtrend while US Treasuries ($TLT) trended lower.

The Shanghai Composite ($ASHR) looked to continue higher while Emerging Markets ($EEM) met resistance as they tested all-time highs in an uptrend. The Volatility Index ($VXX) looked to remain low but with an upward bias making the path harder for equity markets to the upside. Their charts looked strong on the longer timeframe. On the shorter timeframe both the $QQQ and $SPY looked gassed and were retrenching. The $IWM continued to lead but also seemed ready to pause.

The week played out with Gold holding at the 200 day SMA and trying to reverse higher while Crude Oil is building new consolidation at higher levels. The US Dollar met resistance and turned back lower while Treasuries consolidated the move lower. The Shanghai Composite made new highs while Emerging Markets printed a new all-time high before profit taking.

Volatility continued to fall back toward the December lows, in a tight range. This has allowed equities to work higher. And all of the Indexes printed new highs. The SPY and QQQ saw light profit taking Friday while the IWM peaked earlier and moved lower later in the week. The IWM then roared back Friday afternoon to close at the all-time highs. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY had closed the prior week with a pullback to the 20 day SMA after falling out of consolidation at a new high. But it had also printed a Hammer reversal candle. Tuesday the reversal was confirmed with a move to the upside. Wednesday it continued and made a new all-time high and then followed with another high Thursday. Friday started with a gap down, but it drove higher all day, until some profit taking hit at the close.

The daily chart shows the continued trend higher out of the symmetrical triangle since November. The Bollinger Bands® continue to run higher with the RSI strong in the bullish zone and the MACD flat but positive. The weekly chart looks even better.

A strong trend higher and new weekly closing high highlight the view. The RSI on this timeframe is holding in the bullish zone with the MACD rising and bullish. There is resistance at 385 above. Support lower comes at 381.25 and 375.50 then 372.50 and 369 before 364.50 and 360. Uptrend.

SPY Weekly, $SPY

With one week to go in January, equity markets remain strong. Elsewhere look for Gold to possibly reverse higher out of its pullback while Crude Oil continues to move up. The US Dollar Index continues it downtrend while US Treasuries consolidate in their move lower. The Shanghai Composite looks to continue higher after making 5 year highs while Emerging Markets print all-time highs, not seem in over 13 years as they continue to move up.

The Volatility Index looks to remain low and stable 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 have resumed their paths higher, while the IWM is taking a breather at new all-time highs. Use this information as you prepare for the coming week and trad’em well.

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