SPY Trends and Influencers September 8, 2018

Last week’s review of the macro market indicators noted with eight months in the books and the long Labor Day Weekend upon us the equity markets were waking up tanned and rested from their summer vacation. Elsewhere looked for Gold ($GLD) to possibly pause in its downtrend while Crude Oil ($USO) resumed the path higher. The US Dollar Index ($DXY) was searching for support in a pullback while US Treasuries ($TLT) were in broad consolidation.

The Shanghai Composite ($ASHR) and Emerging Markets ($EEM) were biased to the downside with the former on the cusp of new 4 year lows. Volatility ($VXX) looked to remain very low keeping the bias higher for the equity index ETF’s. Their charts were now showing strength on both the daily and weekly timeframes as all ended August at monthly all-time highs.

The week played out with Gold continuing to build what could be a bull flag in its bounce while Crude Oil met resistance and headed lower. The US Dollar found support and moved slightly higher but quickly met resistance while Treasuries moved lower in consolidation. The Shanghai Composite continued to drift near 2700 while Emerging Markets dropped back to the August lows.

Volatility drifted higher into the low teens, making life harder for equities but not unbearable. The Equity Index ETF’s all moved lower on the week in reaction, with the QQQ leading the path lower and the IWM and SPY being more stubborn about giving up gains. All 3 bounced Friday though until more tariff talk reversed that in the afternoon. What does this mean for the coming week? Lets look at some charts.

SPY Daily, $SPY

The SPY came into the week pulling back slowly from a new all-time high. It had gapped up to get there to start the prior week. Tuesday it drifted slightly lower and added to the loss again Wednesday and Thursday. Thursday’s price action closed the gap that led to the all-time high. Friday the SPY went on a wild ride, driving lower early, and tagging the prior break out level, and then bouncing to be up on the day by noon.

Then the “T” word, tariffs, was spoken and it fell back to the lows of the day. It could not gather strength and ended down again for 4 days in a row. It sits at the 20 day SMA on the daily chart with the RSI pulling back in the bullish zone. The MACD has crossed down but remains bullish with the Bollinger Bands® running flat.

On the weekly chart another small body candle in the trend higher. This one closes the gap from the prior week. The RSI on this timeframe is retreating from a touch at overbought with the MACD starting to level as it moves higher. There is resistance above at 290 and 291.50. There is support below 287.50 at 286 and 284 then 283 and 280. Pause in Uptrend.

SPY Weekly, $SPY

Closing the books on summer vacations with the short week, the equity markets saw some profit taking, but remain with strong long term charts. Elsewhere look for Gold to possibly pause in its downtrend while Crude Oil slowly drifts higher long term. The US Dollar Index is marking time sideways while US Treasuries are biased to continue lower. The Shanghai Composite and Emerging Markets did nothing to change their downside trends.

Volatility has crept higher and set up to slowly continue, keeping pressure on equity markets. The equity index ETF’s SPY, IWM and QQQ, all reacted with moves lower on the week. The QQQ was the hardest hit and then the small caps with the SPY down less than 1%. Use this information as you prepare for the coming week and trad’em well.

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