SPY Trends and Influencers October 3, 2020

Last week’s review of the macro market indicators saw with only 3 trading days left in the 3rd Quarter, equity markets continued to show weakness. Elsewhere looked for Gold ($GLD) to continue its pullback in an uptrend while Crude Oil ($USL) consolidated in a broad range. The US Dollar Index ($DXY) looked to continue the move to the upside while US Treasuries ($TLT) consolidated. The Shanghai Composite ($ASHR) and Emerging Markets ($EEM) looked to continue the pullback in consolidation. 

The Volatility Index ($VXX) looked to continue the very slow move lower making the path easier for equity markets to the upside. Their charts continued to look weak, especially on the shorter timeframe. On the longer timeframe both the $QQQ and $SPY were building bull flags, with the $IWM in a slightly weaker position.

The week played out with Gold reversing back to the upside while Crude Oil broke the consolidation to the downside. The US Dollar pulled back to retest the break out from last week while Treasuries drifted to the bottom of the consolidation range. The Shanghai Composite held near support in a holiday shortened week while Emerging Markets started higher but stalled at a lower high.

Volatility held over support until a small spike to a lower higher on Friday. This allowed equities to move higher early in the week. They all were knocked back Friday morning before an intraday move higher. This resulted in the SPY and QQQ ending slightly higher on the week but with the IWM outpacing both to take the lead. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week bouncing in a pullback. It gapped higher to the 50 day SMA to start the week and held there through Wednesday. It broke above the 50 day SMA Thursday and back over the 20 day SMA. But Friday saw a gap down open before a recovery all day to close back at the 50 day SMA.

The daily chart shows the Bollinger Bands® tightening with the RSI holding at the mid line. The MACD has crossed up but remains in negative territory. This is all occurring at the February high. The weekly chart shows confirmation of a Hammer reversal candle that reversed off of the 20 week SMA.

The RSI is also reversing back to the upside with the MACD look as though it may avoid a cross down. There is resistance at 336 and 339.30 then 341 and 342.20 before 344.70. Support lower comes at 332 and 327 then 324 and 321before 318.50. Possible Reversal of Pullback.

SPY Weekly, $SPY

As the 4th Quarter begins, equity markets are hinting at a rebound from an ugly September. Elsewhere look for Gold to continue its short term move higher while Crude Oil consolidates in a broad range. The US Dollar Index looks to be reversing to the upside while US Treasuries drift lower in consolidation. The Shanghai Composite looks to continue in consolidation while Emerging Markets consolidate under long term resistance.

The Volatility Index looks to remain in moderate territory not really hurting or making it easier for equity markets to the upside. Their charts look stronger on the longer timeframe, reversing off of the downtrend. On the shorter timeframe the IWM is breaking a bull flag to the upside, leading the markets. Both the QQQ and SPY are stalled though and without making higher highs. Use this information as you prepare for the coming week and trad’em well.

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