SPY Trends and Influencers January 9, 2021

Last week’s review of the macro market indicators saw With the books closed on 2020, equity markets ended on a positive foot, looking strong with more upside to come despite a wild first quarter drop. The $IWM and $SPY both ended the year up over 15% after being down over 30% in March. The $QQQ put them to shame climbing over 47% on the year.

Going forward it looked for Gold ($GLD) to continue its short term move higher, pressuring the bull flag, while Crude Oil ($USL) drifted to the upside. The US Dollar Index ($DXY) continued to move lower while US Treasuries ($TLT) continued their downtrend. The Shanghai Composite ($ASHR) looked to continue the breakout to the upside while Emerging Markets ($EEM) slowly moved higher.

The Volatility Index ($VXX) looked to remain low 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 had regained their momentum while the IWM had reset momentum a bit lower, perhaps for another run to the upside.

The week played out with Gold pushing to the upside but meeting resistance and dropping back while Crude Oil started lower but recovered and resumed the trend higher. The US Dollar continued to push lower while Treasuries broke to the downside, accelerating the trend lower. The Shanghai Composite marched higher until some profit taking Friday while Emerging Markets continued their push higher toward the 2007 all-time high.

Volatility rose rose Monday but fell back the rest of the week to end little changed. This put initial pressure on equities and they moved lower Monday. All found support and by Wednesday had reversed higher. This resulted in the SPY, IWM and QQQ making new all-time highs by Thursday and continuing Friday. 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. It gave a scare on Monday, printing a bearish engulfing candle and closing under the 20 day SMA for the first time since November 3rd, election day. It recovered Tuesday and then raced higher Wednesday, and despite protestors storming the Capitol building, weathered an intraday pullback to finish higher.

It then continued higher the rest of the week, closing at another new all-time high. The daily chart shows the strong movement higher taking price outside of the Bollinger Bands® as they open to the upside. The RSI is rising in the bullish zone with the MACD crossing up and positive. This timeframe looks very bullish.

The weekly chart shows continuation higher. The price is riding the Bollinger Bands higher with the RSI strong and rising. The MACD is rising as well. There is no resistance higher but a target to 392 above from the triangle break on the daily chart. Support lower comes at 375.50 and 372.50 then 369 and 364.50 before 360 and 356. Uptrend.

SPY Weekly, $SPY

With the first week of 2021 in the books, equity markets showed resilience with a strong move higher despite frightening political news. Elsewhere look for Gold to continue its short term pullback in consolidation while Crude Oil marches higher. The US Dollar Index continues to drift to the downside while US Treasuries move in a downtrend. The Shanghai Composite and Emerging Markets are driving higher in uptrends.

The Volatility Index looks to remain low and stable making the path easier for equity markets to the upside. Their charts look strong on both timeframes. On the shorter timeframe both the QQQ and SPY sit at all-time highs in uptrends with the IWM a tad bit overbought. On the longer timeframe all 3 are in very strong uptrends. Use this information as you prepare for the coming week and trad’em well.

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