SPY Trends and Influencers October 31, 2020

Last week’s review of the macro market indicators saw with one week left before the election, equity markets were consolidating with minor retrenching. They were not showing signs of nervousness around the outcome. Elsewhere looked for Gold ($GLD) to continue its pullback in the uptrend while Crude Oil ($USL) consolidated in a broad range. The US Dollar Index ($DXY) continued to drift to the downside while US Treasury ($TLT) prices were in a downtrend.

The Shanghai Composite ($ASHR) looked to continue to consolidate while Emerging Markets ($EEM) remained in an uptrend. The Volatility Index ($VXX) looked to remain in moderate territory, neither helping nor hurting equity markets. Their charts were in consolidation on the shorter timeframe and pausing in the uptrends on the longer frame. On the shorter timeframe the $IWM was holding up best with both the $QQQ and $SPY pulling back in bull flags.

The week played out with Gold pushing to the downside but finding support late in the week while Crude Oil fell out of consolidation. The US Dollar found support and reversed higher in broad consolidation while Treasuries made another lower high and reversed down. The Shanghai Composite fell back to support while Emerging Markets fell back and crossed under support.

Volatility rose up off to the June highs and held. This put pressure on equities and they responded by moving lower all week. This resulted in the SPY and QQQ ending back below their 100 day SMA’s with the IWM continuing to lead, holding at the 50 day SMA. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY had fallen back from a lower high but was holding at the confluence of the 20 day and 50 day SMA’s coming into the week. It drifted lower Monday and Tuesday, breaking those moving averages but holding at a retest of the February high. Wednesday saw a gap down though at the open. It rose to close the gap before falling back and then closing the gap from September.

It held there Thursday and then again Friday after recovering from a new 5 week low. The daily chart shows the RSI into the bearish zone and falling with the MACD negative and dropping. The Bollinger Bands® are also opening lower. One item to note, it has not made a lower low yet.

The weekly chart shows a strong move lower breaking the 20 week SMA. The RSI is also dropping at the midline with the MACD crossed down. There is support lower at 324 and 321 then 318.50 and 313.50. Resistance above is at 327 and 332 then 336 and 339.30 before 341. Short Term Downtrend in Broad Consolidation Channel.

SPY Weekly, $SPY

With ten months in the books, equity markets look to start November sitting on support with downside momentum building into the election. Elsewhere look for Gold to continue its pullback while Crude Oil may begin a new downtrend. The US Dollar Index continues to rise in consolidation while US Treasuries continue in their downtrend. The Shanghai Composite looks to continue to consolidate while Emerging Markets pullback in their uptrend.

The Volatility Index is spiking, putting a headwind against the equity markets. Their charts are all in downtrends on the shorter timeframe. On the longer timeframe both the QQQ and SPY sit on support and at risk of a break down. The IWM continues to lead, holding up the best of the three. Use this information as you prepare for the coming week and trad’em well.

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