SPY Trends and Influencers May 9, 2020

• Posted by Greg Harmon
• on May 9th, 2020

Last week’s review of the macro market indicators saw the books were closed on the first 4 months of the year and equity markets seemed to be in need of some rest as they started May. Elsewhere looked for Gold ($GLD) to consolidate in the uptrend while Crude Oil ($USL) continued to move higher. The US Dollar Index ($DXY) continued in consolidation while US Treasuries ($TLT) consolidated in their uptrend. The Shanghai Composite ($ASHR) looked to continue consolidation in a shortened week while Emerging Markets ($EEM) were poised for a possible reversal lower. 

The Volatility Index ($VXX) looked to remain elevated and not so ready to move lower putting a speed bump in the path for equity markets. Their charts showed consolidation in the shorter timeframe, holding in bullish ranges, but all had printed possible reversal candles on the longer timeframe. The $QQQ continued to look the strongest with the $SPY next and the $IWM bringing up the rear.     

The week played out with Gold bouncing around 1700 while Crude Oil moved up early and then consolidated. The US Dollar moved higher in consolidation while Treasuries drifted lower before a late week rally regained most of the drop. The Shanghai Composite came back from the break and moved higher while Emerging Markets closed the gap above but remained in a narrow range.

Volatility fell back reaching a 2 month low. This eased the pressure on equities. They responded with a gap down Monday but than ran higher on the week, recovering after a dip Wednesday as well. This resulted in the QQQ ending back in positive territory on the year with the SPY at the 61.8% retracement of its drop and the IWM continuing back toward the April high. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week pulling back from a touch at the 61.8% retracement of the drop. Monday it found support at the 20 day SMA and then moved higher. Wednesday it retraced again but then ended the week strong at the 61.8% retracement. The daily chart shows the RSI turning back up to make a run at the bullish zone while the MACD is flat but positive. The Bollinger Bands® are tightening as well and the confluence of SMA’s above at 300 continues to get tighter.

The weekly chart shows a bullish Marubozu moving up through the 200 week SMA. This follows 3 narrow range weeks. The RSI is rising as it hits the mid line with the MACD about to cross up, but still negative. There is resistance at 294 and 297 then 300 and 302.50 before 304.50. Support lower comes at 291 and 287 then 285 and 281 before 275. Uptrend.

SPY Weekly, $SPY

Heading into the May options expiration week, equity markets showed great strength in the face of historically horrible economic data. Elsewhere look for Gold consolidate at highs while Crude Oil consolidates the short term move higher. The US Dollar Index continues to tighten the range while US Treasuries pullback. The Shanghai Composite continues to consolidate under resistance in a broad range while Emerging Markets consolidate under long term resistance.

The Volatility Index looks to continue to move lower making the path easier for equity markets to the upside. Their charts also look strong, especially on the longer timeframe. On the shorter timeframe both the QQQ and SPY are at potential resistance points with the IWM having the easiest path higher. Use this information as you prepare for the coming week and trad’em well.

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