SPY Trends and Influencers July 18, 2020

• Posted by Greg Harmon
• on July 18th, 2020

Last week’s review of the macro market indicators saw heading into July Options Expiration that the equity markets were showing renewed strength. Elsewhere looked for Gold ($GLD) to continue its uptrend while Crude Oil ($USL) consolidated over support. The US Dollar Index ($DXY) continued to drift to the downside while US Treasuries ($TLT) might resume their uptrend. The Shanghai Composite ($ASHR) looked to continue the drive higher while Emerging Markets ($EEM) also moved to the upside.

The Volatility Index ($VXX) looked to remain elevated, but moving lower, making the path easier for equity markets to the upside. Their charts looked strong on both timeframes with the exception of the small caps. The $QQQ was leading the charge on both timeframes as it set new all-time highs every day. The $SPY had a strong finish to the week and looked ready to break higher as well. The $IWM however remained stuck in consolidation on both timeframes.

The week played out with Gold chopping around in a narrow range, holding mostly over 1800 while Crude Oil dropped early but recovered to hold near 40. The US Dollar continued to drift lower, finding support at the June lows while Treasuries met resistance and and consolidated. The Shanghai Composite finally met resistance and rolled over to the downside while Emerging Markets stalled but gave up little ground.

Volatility rose slightly Monday but fell back mid week to end slightly lower on the week. This put initial pressure on equities and they responded by starting the week moving lower. All found support by Tuesday and reversed though. This resulted in the SPY ending slightly higher, and the IWM making a bigger move to the upside. The QQQ ended the week slightly lower. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week in a short consolidation, under the June gap and sitting on the 78.6% retracement of the fall from February. It started higher Monday, closing the gap, and then fell back. Tuesday started lower but then recovered and went on to recapture most of Mondays drop.

It held in a tight range the rest of the week, at the June highs and just under the 88.6% retracement of the drop. The daily chart shows the RSI running sideways in the bullish zone. The MACD is rising and positive with the price riding the Bollinger Bands® higher.

The weekly chart shows a push up over June highs for the highest weekly close since before the drop. The RSI is rising and now near a move into the bullish zone with the MACD climbing and positive. There is resistance above at 325 and 332 then 339. Support lower comes at 320 and 318.50 then 313.50 and 309.50 before 305.50. Uptrend.

SPY Weekly, $SPY

With the July Options expiration in the books, equity markets showed some rotation, out of technology and into small caps and, to a lesser degree, large caps. Elsewhere look for Gold to consolidate in its uptrend while Crude Oil consolidates under resistance. The US Dollar Index continues to drift to the downside while US Treasuries rise in the consolidation range. The Shanghai Composite looks to continue the pullback in the uptrend while Emerging Markets pause in their uptrend.

The Volatility Index looks to continue to slowly move lower making the path easier for equity markets to the upside. Their charts continue to look strong, especially on the shorter timeframe. The QQQ looks to have given up the leadership role and is pausing, perhaps prepping for a pullback, while the SPY and IWM move up out of recent consolidation. Use this information as you prepare for the coming week and trad’em well.

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