SPY Trends and Influencers March 20, 2021

• Posted by Greg Harmon
• on March 20th, 2021

Last week’s review of the macro market indicators saw heading into March options expiration, equity markets were mixed with small caps and large caps strong but the heavily tech weighted Nasdaq looked weaker. Elsewhere looked for Gold ($GLD) to continue its pullback while Crude Oil ($USL) continued to move higher. The US Dollar Index ($DXY) looked to pullback in the reversal higher while US Treasuries ($TLT) continued the downtrend. The Shanghai Composite ($ASHR) was possibly reversing higher while Emerging Markets ($EEM) pulled back in their uptrend.

The Volatility Index ($VXX) looked to remain low making the path easier for equity markets to the upside. The charts for $SPY and $IWM looked strong, especially on the longer timeframe. On the shorter timeframe both were making new highs signaling renewed short term strength. The $QQQ was now the problem child with a series of lower highs signaling short term weakness, but with no real long term damage as yet.

The week played out with Gold drifting to the upside while Crude Oil drifted lower until a break down Friday. The US Dollar held in consolidation in a narrow range while Treasuries continued lower, touching a new 20 month low before a Friday bounce. The Shanghai Composite met resistance as it hit intermediate resistance and consolidated while Emerging Markets held under the 20 day SMA and over support.

Volatility started the week moving lower and falling into the Pandemic gap but reversed mid week to end little changed. This initially led equities to move higher and the SPY and IWM moved up to new all-time highs. They all reversed lower late in the week though. It felt like a heavy move lower but the SPY ended the week slightly more than 1% lower and the QQQ down less than 1%. It was the IWM that took the biggest plunge, after leading to the upside last 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 and trending higher. It continued to move up Monday held up Tuesday before another new high on Wednesday. Thursday saw a reversal lower and follow through Friday to break the 20 day SMA before a recovery and close above it. The daily chart shows the pullback with the RSI rolling over at a lower high and the MACD doing the same, both remaining in bullish ranges. The Bollinger Bands® have gone flat on top.

On the weekly chart clear resistance is being established just under 400. The Bollinger Bands are started to tighten with the RSI holding high in the bullish zone. The MACD has crossed down in a flat move. There is support lower at 389 and 386 then 381.25 and 375.50 before 372.50 and 369. Resistance higher is at 393 and 395 then 397. Pause in Uptrend.

SPY Weekly, $SPY

With the March Quad Witching in the books, equity markets continue to show signs of strain. Elsewhere look for Gold to continue its pullback while Crude Oil pulls back in its uptrend. The US Dollar Index is on the verge of a reversal to the upside while US Treasuries continue to move lower. The Shanghai Composite looks to be on the edge of a reversal lower while Emerging Markets pullback in their uptrend.

The Volatility Index looks to remain low making the path easier for equity markets to the upside. Their charts however are showing signs of fatigue on the shorter timeframe, with the QQQ the weakest. On the longer timeframe both the SPY and the IWM remain strong but in a pause with the QQQ consolidating over support after a small pullback. Use this information as you prepare for the coming week and trad’em well.

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