SPY Trends And Influencers: Volatility Ticks Higher

SPX Monthly Chart

Last week’s review of the macro market indicators saw heading into the FOMC meeting and on the edge of closing out July that equity markets remained strong. Elsewhere looked for Gold ($GLD) to continue to mark time in its uptrend while Crude Oil ($USO) paused in the move lower. The US Dollar Index ($DXY) seemed looks to move higher in consolidation while US Treasuries (TLT) paused and consolidated their move up.

The Shanghai Composite ($ASHR) and Emerging Markets ($EEM) were both in consolidation mode with no indication that would change. Volatility ($VXXB) looked to remain very low keeping the bias higher for the equity index ETF’s SPDR S&P 500 $SPY,$IWM and $QQQ. Their charts all agreed with this on the shorter timeframe and were moving higher. But with the SPY and QQQ making all-time highs and driving to the upside on the longer timeframe, the IWM continued to lag and remains in a range.

The week played out with Gold catching a bid and moving higher while Crude Oil got smacked down late in the week. The US Dollar marched higher before also getting hit late in the week while Treasuries rocketed to 34-month highs. The Shanghai Composite cracked and fell back to June levels while Emerging Markets also dropped.

Volatility ticked higher all week with an acceleration into the weekend, shifting the bias lower for equities. The Equity Index ETF’s all started the week quietly and weathered the FOMC decision but then fell hard following the announcement of new tariffs on Chinese products. They ended the week at one-month lows. What does this mean for the coming week? Let’s look at some charts.

SPY Daily, $SPY

SPY Daily Chart

The SPY was running on all cylinders and making new all-time highs as the week started. It printed an inside day Monday and followed that up Tuesday with a small move lower to the 20 day SMA. Wednesday the SPY dropped following the FOMC decision to cut rates but only marginally. It was recovering Thursday when the “T” word (tariffs) was tweeted out and it accelerated to the downside. Friday saw follow through lower.

It ended the week off more than 3% from the highs and at the 50 day SMA. The daily chart shows the RSI has pulled back to the lower edge of the bullish zone with the MACD falling but still positive. It is notable that it is well outside of the Bollinger Bands®, a situation it does not stay in for long historically. It also printed a Hammer candle Friday which may signal the bottom if confirmed higher Monday.

The weekly chart shows a long strong red candle ending near the low of the week. The RSI on this timeframe is falling back to the midline with the MACD dipping but positive. It also remains above the 20 week SMA. There is support lower at 292 and 290 then 287 and 285 before 284 and 282. Resistance above stands at 294 and 295 then 296.25 and 298.80 before 300. Pullback in Uptrend.

SPY Weekly, $SPY

SPY Weekly Chart

Heading into the dog days of August equity markets have been dinged despite an accommodative FOMC. Elsewhere look for Gold to move higher while Crude Oil continues to head lower. The US Dollar Index also looks to strengthen while US Treasuries are biased to continue higher. The Shanghai Composite looks to continue lower in the short term while Emerging Markets resume a downtrend.

Volatility looks to move higher putting a bias lower for the equity index ETF’s SPY, IWM and QQQ. Their charts also point to some short term weakness, especially in the SPY and QQQ. Long term the SPY and QQQ still remain strong with the IWM stuck in a range. Use this information as you prepare for the coming week and trad’em well.

Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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