SPY Trends and Influencers July 17, 2021

• Posted by Greg Harmon
• on July 17th, 2021

The review of the macro market indicators two weeks ago saw, with the books closed on the 2nd Quarter and heading into the 4th of July weekend, equity markets looked very strong on the large cap and tech focused indexes. Elsewhere looked for Gold ($GLD) to possibly move back higher while Crude Oil ($USL) continued the uptrend. The US Dollar Index ($DXY) continued to rise in broad consolidation while US Treasuries ($TLT) paused in their reversal higher. The Shanghai Composite ($ASHR) looked to remain in broad consolidation while Emerging Markets ($EEM) consolidated broadly over long term support.

The Volatility Index ($VXX) looked to remain very low making the path easier for equity markets to the upside. Their charts looked strong, especially on the longer timeframe with the $SPY and $QQQ re-igniting uptrends while the $IWM continued to hold up in consolidation. On the shorter timeframe both the QQQ and SPY were running high on momentum measures so both could see a short term consolidation or digestive move. The tight Bollinger Bands® on the IWM might play a role then.

The week played out with Gold pushing to the upside but then meeting profit taking Friday while Crude Oil met resistance and started to pullback to support. The US Dollar found support and reversed back to the top of the range while Treasuries held lower early before racing higher at the end of the week. The Shanghai Composite met resistance at a lower high and held in consolidation while Emerging Markets continued higher to a top Thursday before selling Friday.

Volatility held at last week’s low levels in a tight range. This lifted the pressure off of equities and they responded with an early week move higher. The IWM reversed first on Tuesday and continued lower all week. The SPY and QQQ held up through Wednesday before giving up gains late in the week to finish down on the week. 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 printed another one Monday before stalling and then reversing to the downside Thursday. Friday it printed a bearish Marubozu candle, boding for more possible downside. The daily chart shows it holding over the 20 day SMA after the first down Friday since June 18. It is also the first Friday that has not been a new all-time high since then.

The RSI is making a lower low, below the July 8 pullback, setting up for a Positive RSI Reversal should it rise Monday, but also signaling fading bullish momentum. The MACD is rolling to cross down. Note the last 5 pullbacks have found support near the 50 day SMA should it continue lower. The weekly chart shows the possible reversal as more of a stall and consolidation.

The sideways top coincides with the RSI pulling back from overbought in the bullish zone with the MACD mainly level but crossed down. Not a doomsday scenario but time for some caution. There is support lower at 430.50 and 428.50 then 425.50 and 423 before 420 and 417.40 then 413.75 and 411, under the 161.8% extension of the pandemic retracement. Resistance higher sits at 433.75 and 437. Stall in Uptrend.

SPY Weekly, $SPY

July options expiration and the first week of earnings season are in the books, and equity markets came through them a bit worse for wear. Elsewhere look for Gold to continue its short term uptrend while Crude Oil pulls back in its move higher. The US Dollar Index continues a short term move higher in consolidation while US Treasuries move to the upside. The Shanghai Composite looks to continue consolidation while Emerging Markets pullback as they consolidate over long term support.

The Volatility Index looks to remain low making the long term path easier for equity markets to the upside but drifting up to give them short term trouble. The SPY and QQQ charts continue to look strong on the longer timeframe, with the IWM testing support in its long consolidation. On the shorter timeframe both the QQQ and SPY are in pullbacks while the IWM is at risk for a bigger drop. Use this information as you prepare for the coming week and trad’em well.

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