SPY Trends and Influencers September 26, 2020

• Posted by Greg Harmon
• on September 26th, 2020

Last week’s review of the macro market indicators saw September Options expiry ended and equity markets pulled back after an early start higher. Elsewhere looked for Gold ($GLD) to consolidate in its uptrend while Crude Oil ($USL) moved higher in the short term. The US Dollar Index ($DXY) looked to continue to consolidate the recent drop while US Treasuries ($TLT) marked time after pulling back slightly in their uptrend.

The Shanghai Composite ($ASHR) looked to remain in broad consolidation while Emerging Markets ($EEM) consolidated under long term resistance.  The Volatility Index ($VXX) looked to continue the broad trend drifting lower making the path easier for equity markets to the upside. Their charts looked weak though, especially the $QQQ and $SPY. Both were moving lower in both timeframes. The $IWM was outperforming both, stable in the short run, and rising in the longer timeframe.

The week played out with Gold pulling back to the 20 week SMA and finding support while Crude Oil met resistance and held as it retested the prior channel. The US Dollar saw strength and moved higher while Treasuries continued to move sideways. The Shanghai Composite fell back to the September lows, still in consolidation, while Emerging Markets dropped back to July levels as they moved lower.

Volatility rose but only slightly, putting pressure on equities later in the week. They all started the week with a gap down but then found support and held over it despite a choppy week. This resulted in the SPY and IWM ending at new 2½ month weekly lows despite a strong finish Friday afternoon. The QQQ held on to close up on the week. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

The SPY came into the week at a 6 week low and with the Bollinger Bands® opening lower. It gapped down Monday and held with a move to close the gap Tuesday. Then Wednesday saw a Marubozu candle lower. But rather than follow though it rebounded Thursday and then had a strong move higher Friday. It was not enough to overcome that Monday gap though and it finished lower for a 4th week. The daily chart shows the bounce on Thursday at the 100 day SMA. The RSI is turning up and remains in the bullish zone, at the lower bound. The MACD is continuing lower and negative though.

On the weekly chart a Hollow Red Candle shows the strong intraweek action despite the move lower. It bottomed at the 20 week SMA and the candle is in the form of a Hammer, a possible reversal. The RSI is leveling as it pulls back to the mid line with the MACD crossing down. There is support lower at 327 and 324 then 321 and 318.50 before 313.50 and 308.50. Resistance higher is found at 332 and 336 then 339.30 and 341 before 342.20. Pullback in Uptrend.

SPY Weekly, $SPY

With only 3 trading days left in the 3rd Quarter, equity markets continue to show weakness. Elsewhere look for Gold to continue its pullback in an uptrend while Crude Oil consolidates in a broad range. The US Dollar Index looks to continue the move to the upside while US Treasuries consolidate. The Shanghai Composite and Emerging Markets looks to continue the pullback in consolidation.

The Volatility Index looks to continue the very slow move lower making the path easier for equity markets to the upside. Their charts continue to look weak, especially on the shorter timeframe. On the longer timeframe both the QQQ and SPY are building bull flags, with the IWM in a slightly weaker position. Use this information as you prepare for the coming week and trad’em well.

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