SPY Trends and Influencers September 12, 2020

• Posted by Greg Harmon
• on September 12th, 2020

Last week’s review of the macro market indicators saw wrapping up August and heading into the unofficial end of summer, that equity markets had finally ran out of gas and pulled back. Elsewhere looked for Gold ($GLD) to continue in consolidation while Crude Oil ($USL) possibly moved to a downtrend. The US Dollar Index ($DXY) was moving to the upside possibly out of consolidation while US Treasuries ($TLT) consolidated. The Shanghai Composite ($ASHR) looked to consolidate as well while Emerging Markets ($EEM) paused in their uptrend. 

The Volatility Index ($VXX) looked to push up towards the June highs making the road rough for equity markets. Their charts were showing possible reversals or at least indecision on the longer timeframe. On the shorter timeframe the $IWM, the $QQQ and $SPY ended the week with possible reversal candles though adding confusion to the story.

The week played out with Gold rising up off of support while Crude Oil broke support of the channel and then held lower. The US Dollar paused as it hit the top of the consolidation range while Treasuries held in their consolidation. The Shanghai Composite moved lower and then held while Emerging Markets pulled back to recent support.

Volatility reached a lower peak Tuesday and fell back to end the week lower. This took some pressure off of equities and they held at the recent lows with some bouncing around. This left the SPY, IWM and QQQ in the lower half of consolidation ranges after the pullbacks from last week. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week 4.5% off the high and sitting on the 20 day SMA. It broke down Tuesday and closed near the low, now more than 7% from the high. It bounced back to touch the Friday level but held within that range all week, closing at the low on Friday after a touch at the 50 day SMA. The daily chart shows price now below the February highs. The RSI is moving sideways, holding in the bullish zone with the MACD dropping but still positive. The price is approaching the lower of the Bollinger Bands® as they flatten.

The weekly chart shows the price now close to a retracement to the 2019 close. The long upper and lower shadows signal indecision. The RSI is pulling back from a touch at overbought and a lower high with the MACD rolling over from an extreme level. There is support lower at 332 and 327 then 324 and 320 before 318.50. Resistance higher is at 336 and 339.30 then 341 and 342.20 before 344.70. Consolidation in Pullback.

SPY Weekly, $SPY

With a second week lower and heading into the September options expiration, equities are trying to catch their breath but looking weak. Elsewhere the word is consolidation. Look for Gold to continue its consolidation while Crude Oil breaks consolidation lower. The US Dollar Index continues to consolidate after the drop while US Treasuries move sideways. The Shanghai Composite looks to continue an intermediate consolidation while Emerging Markets consolidate under long term resistance.

The Volatility Index looks to resume a drift lower making the path easier for equity markets to the upside. Their charts still look at risk though, especially on the longer timeframe. On the shorter timeframe both the QQQ and SPY are in consolidation after a drop while the IWM is looking the weakest in a pullback. Use this information as you prepare for the coming week and trad’em well.

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