SPY Trends and Influencers May 15, 2021

Last week’s review of the macro market indicators saw after the first week of May in the books, investors started the month with a very brief sell off in the equity markets, but they did not go away. Elsewhere looked for Gold ($GLD) to continue its move higher while Crude Oil ($USL) consolidated in the uptrend. The US Dollar Index ($DXY) continued to the downside while US Treasuries ($TLT) stalled in their bounce. The Shanghai Composite ($ASHR) looked to continue to mark time moving sideways while Emerging Markets ($EEM) consolidated the pullback in their uptrend.

The Volatility Index ($VXX) looked to remain very low making the path easier for equity markets to the upside. Their charts looked strong on the longer timeframe, with the $IWM and $QQQ holding near highs while the $SPY was leading to the upside. On the shorter timeframe again, the SPY was flexing while the QQQ tried to reverse to the upside and the IWM recovered.

The week played out with Gold meeting resistance and dropping back before a late week rebound while Crude Oil continued to consolidate over support. The US Dollar found support and bounced only to roll over Friday while Treasuries moved lower. The Shanghai Composite drifted until a strong move higher Friday while Emerging Markets pulled back to the March low before bouncing.

Volatility Spiked higher midweek and then pulled back to finish slightly higher. This put initial pressure on equities and they responded with a 3 day move lower. All found support overnight into Thursday and reversed to finish the week with a burst higher. This resulted in the SPY, IWM and QQQ ending off their all-time highs. The SPY made a higher low while the IWM made a lower low. The QQQ is too close to tell but may make a higher low as well. 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. Monday it printed a bearish engulfing candle and then confirmed it with a gap down move Tuesday. It continued lower Wednesday, finding support as it touched the 50 day SMA for the first time since March. It reversed higher from there, closing in the gap from Tuesday.

The daily chart shows the RSI reversing at the lower edge of the bullish zone, creating a Positive RSI Reversal with the lower low in the RSI compared to the March 25 low, while price did not make a lower low. This gives a target to 443. The MACD caught itself and moved level in positive territory.

On the weekly chart there is another Hanging Man candle though, holding over the 161.8% extension of the retracement of the pandemic drop. The RSI on this timeframe is dropping out of overbought territory while the MACD pulls back from a top. There is resistance at 417.40 and 420 then 423 and the 200% extension at 458. Support lower comes at 413.50 and 411 then 407 and 403 before 400.70 and 397. Uptrend.

SPY Weekly, $SPY

Heading into May options expiration week, equities markets have become mixed. Elsewhere look for Gold to continue its move higher while Crude Oil consolidates in a tight range. The US Dollar Index resumes its move to the downside while US Treasuries consolidate in their pullback. The Shanghai Composite looks to continue to mark time moving sideways while Emerging Markets consolidate just under the February highs.

The Volatility Index looks to remain low after a spike making the path easier again for equity markets to the upside. Their charts also look good on the longer timeframe, with the SPY showing real strength over the IWM and QQQ in consolidation. On the shorter timeframe both the QQQ and SPY held at higher lows and reversed showing some strength while the IWM continues in the 4 month churn. Use this information as you prepare for the coming week and trad’em well.

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