SPY Trends and influencers May 22, 2021

Last week’s review of the macro market indicators saw heading into May options expiration week, equities markets had become mixed. Elsewhere looked for Gold ($GLD) to continue its move higher while Crude Oil ($USL) consolidated in a tight range. The US Dollar Index ($DXY) resumed its move to the downside while US Treasuries ($TLT) consolidated in their pullback. The Shanghai Composite ($ASHR) looked to continue to mark time moving sideways while Emerging Markets ($EEM) consolidated just under the February highs.

The Volatility Index ($VXX) looked to remain low after a spike making the path easier again for equity markets to the upside. Their charts also looked 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 continued in the 4 month churn.

The week played out with Gold pushing to the upside but meeting resistance as the week wore on while Crude Oil continued to consolidate under long term resistance. The US Dollar moved lower towards the lows of January while Treasuries drifted slightly higher in consolidation. The Shanghai Composite tested short term resistance but could not break out of consolidation while Emerging Markets moved higher weakly within consolidation.

Volatility spiked higher mid week but fell back later to end slightly higher on the week. This put pressure on equities and they responded by moving lower early in the week. All found support after a gap down Wednesday and reversed to finish the week higher or little changed. This resulted in all three breaking the recent short term range and the SPY ending back near all-time highs. The QQQ and the IWM have some work left to move over their 20 day moving averages. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week just shy of closing a gap down from earlier in the month. It held Monday and dropped back Tuesday. A gap down Wednesday was bought and it continued higher Thursday, retracing Tuesday’s loss. It tried to move higher Friday with a gap up but sold off all day to close lower. This left it back at resistance from a week prior where once was support.

The daily chart shows the RSI holding near the mid line in the bullish zone with the MACD leveling and positive. The weekly chart shows a Hanging Man candle holding over the 161.8% extension of the retracement of the pandemic drop. The RSI is pulling back from overbought territory while the MACD turns lower toward a cross down.

There is support lower at 413.75 and 411 then 407 and 403 before 400.70 and 397. Resistance above comes at 417.40 and 420 then 423. Above that stand the target from the Positive RSI Reversal at 443 and the 200% extension at 458. Consolidation in Uptrend.

SPY Weekly, $SPY

With the May options expiration in the books, equity markets have taken a pause. Elsewhere look for Gold to continue its move higher while Crude Oil consolidates in a tight range. The US Dollar Index continues to drift to the downside and 3½ year lows while US Treasuries consolidation in their downtrend. The Shanghai Composite looks to continue to drift sideways in a broad range while Emerging Markets consolidate over long term resistance in a tightening range.

The Volatility Index looks to remain low making the path easier for equity markets to the upside. Their charts have all shifted to consolidation now though on the longer timeframe, with the SPY the latest to join. On the shorter timeframe the SPY continues to look the strongest with the IWM in the long consolidation next and the QQQ with the most work left to do to return to bullish. Use this information as you prepare for the coming week and trad’em well.

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