SPY, the SPDR S&P 500 ETF advanced 1.42% this past week, faring the strongest of the four majors, while the VIX closed the week out at 13.6, indicating an implied one day move range of +/-0.86% & a one month implied move range of +/-3.93%.
Their RSI has curled over towards the neutral 50 mark & currently sits at 61.76, while their MACD is bullish, but looking set to dolphin-dive back bearishly through the signal line in the coming week.
Volumes were -26.64% lower than the prior year’s average levels (53,125,000 vs. 72,414,800), which doesn’t paint a particularly rosy picture given that three of the four sessions were advancing.
Monday opened on a gap up, but declined to re-test the support of the 10 day moving average, which held up, forcing prices higher & the session closed as a gravestone doji.
While the volume was the highest of the week & it did indicate that there would be short-term advances in the coming week (which were expected given it was in the run up to Christmas), it was sub-par compared to the rest of the year, which lacks medium-to-long-term conviction behind the new all-time high set Friday.
Tuesday opened just below Monday’s opening price & ran higher, but on thin volume, ultimately advancing +0.46% higher day-over-day & forming a bullish engulfing pattern.
Wednesday’s shortened session opened $0.01 lower than Tuesday’s & ran higher, but on even weaker volume than the first two days of the week (adjusted for the shortened week).
Thursday the market was closed for the Christmas holiday.
Friday began to show the waning enthusiasm, as a higher open was unable to go anywhere, forming a doji star & a day-over-day decline of -0.01% on the week’s second weakest volume (only slightly above that of the shortened Wednesday session).
While much of this can be attributed to the holiday the day prior & market participants taking vacation time etc… it began to show weakness after a week of holiday enthusiasm.
Heading into another short week the upside case for SPY to continue higher & setting new all-time highs continues to remain the same, without solid, consistent increased volume DIA’s gains will come under more & more scrutiny.
The fact that it was a holiday week provides some excuse for the waning participation of last week, and will likely continue into this upcoming one, but it doesn’t paint a particularly rosy picture for further upside gains without some major catalyst.
The good news is that due to the quiet week there are limited downside catalysts on the near-term horizon.
For the consolidation case, which is the most likely one, expect to see prices stay within the range of last week’s trading, at lowest testing the support of the 10 day moving average while we await the next upside/downside catalyst.
Speaking of the 10 DMA, notice that it has flattened out while the 50 DMA continues higher & they’re becoming closer together; keep an eye out for a bearish crossover there as based on how SPY has stalled out around this $690/share level yet again there may be steeper declines compared to the last time they crossed over.
While the declines will lead to the crossover, this time there may be added enthusiasm behind the selloff based on how sheepish market participants have become of recent.
To the downside, the next two support levels look easy to be broken through based on profit taking, making the 10 DMA’s support the real spot to be eyeing.
Should it break down, expect to see prices test the 50 DMA & likely pass through them, leading to the aforementioned 10 & 50 DMA bearish crossover.
In the event of this, eyes should go to the $659.26/share support level, as it resides in a Seller dominated zone for the past ~3 years, and sits above another Seller zone (see table below), which would likely lead to a retest of the $648.93/share level, assuming there is no upside catalyst.
QQQ in the next section also may lend clues to what happens next to SPY given how closely they trade to one another.
SPY has support at the $687.67 (Volume Sentiment: NULL, 0:0*), $682.94 (Volume Sentiment: NULL, 0:0*), $681.33 (10 Day Moving Average, Volume Sentiment: NULL, 0:0*) & $675.50/share (50 Day Moving Average, Volume Sentiment: NULL, 0:0*) price levels, with resistance at the $691.66/share (All-Time High, Volume Sentiment: NULL, 0:0*) price levels.
QQQ, the Invesco QQQ Trust ETF gained +1.11% on the week, as the tech-heavy index was the third favorite of the four major index ETFs.
Their RSI has also curled over bearishly towards the neutral 50 level & sits at 57.04 Per Friday’s close, while their MACD is bullish, but looks set to dolphin back through the signal line either this week or next.
Volumes were -32.92% lower than the prior year’s average (32,622,500 vs. 48,631,360), in a similar manner to SPY’s over the shortened holiday week day-over-day.
Monday opened on a gap higher, attempted to climb, but ultimately sank to close lower than the open on the week’s strongest volume to close as a spinning top candle, indicating uncertainty with a tint of bearishness.
Tuesday opened lower, but was able to rally throughout the day to close higher, but on lighter volume than Monday’s already low level.
Wednesday opened lower, but the holiday spirit was in full force & QQQ climbed higher, but closed on by far the lowest volume of the week, indicating that despite the half-day there was waning enthusiasm & participation in the market for the tech-heavy index.
Friday also mirrored SPY’s performance, where a doji star emerged on a daily decline of -0.01% on extremely light volume for a full session, all indicating waning enthusiasm among market participants.
Moving into a new week, the upside for QQQ hinges around being able to break out & above the $624.06/share level, with the next test being $628.40/share before making a run at the all-time high.
Again, like SPY & as echoed in months past, there will need to be a sustained uptick in advancing volume, as current conditions show a bit more uncertainty & some profits being taken before there can be any form of certainty behind a new all-time high, especially given how contracted daily candles have become in the past month vs. the last.
For the consolidation case, expect to see a closing of the window created by Monday’s gap up, followed by oscillations around the 10 & 50 day moving averages while we await an upside or downside catalyst.
The 10 & 50 day moving averages have smoothed out while also bearishly crossing one another, making a downside move likely more pronounced & indicating that they’ll break down.
Should that occur, the $597.90 & $599.51/share support levels are in a Seller zone based on the past year, turning attention to the $589.37/share support level to stop bleeding should things progress that far.
QQQ has support at the $614.86 (50 Day Moving Average, Volume Sentiment: Buyers, 1.17:1), $614.69 (10 Day Moving Average, Volume Sentiment: Buyers, 1.17:1), $612.39 (Volume Sentiment: Buyers, 1.17:1) & $599.51/share (Volume Sentiment: Sellers, 1.17:1) price levels, with resistance at the $624.06 (Volume Sentiment: NULL, 0:0*), $628.40 (Volume Sentiment: NULL, 0:0*) & $636.19/share (All-Time High, Volume Sentiment: NULL, 0:0*) price levels.
IWM, the iShares Russell 2000 ETF added only +0.24% for the week, as the small cap index was the least favored of the major four index ETFs.
Their RSI is trending down towards the neutral 50 level, currently at 55.35, while their MACD remains bearish, as it has for the past couple of weeks.
Volumes were -33.47% lower than the prior year’s average (23,505,000 vs. 35,332,280), indicating some level of complacency given IWM straddled the 10 day moving average all week, treating the short-term moving average as a balance beam.
Monday IWM opened on a gap up, made a run at the $255/share level, temporarily breaking above it, but closed below it for a +1.11% advance on the day on the week’s highest volume.
Tuesday opened near the low end of Monday’s range & mimicked Friday’s doji candle that SPY & QQQ sported for the week, providing potential insight into what we’ll see next week/the following given that next week is also a shortened holiday week.
Wednesday opened in-line with the 10 DMA’s support, floating just above it, before temporarily breaking down below it but managing to rally back higher to close +0.25% on the day.
Despite the half-day, Wednesday’s volume was eclipsed by each other session of the year’s volume, which casts a shade of doubt on the strength of the short-term trendline.
Friday opened lower & continued to decline, temporarily breaking down the support of the 10 DMA, but managed to rally higher to close above it.
Friday also had extrodinarily low volume compared to the rest of the year, indicating that there is still quite a bit of uncertainty among market participants.
For the upside case, $251.92/share will need to be broken above before there can be any moves towards the all-time high, which aren’t impossible given the January effect on small-cap names, but should broader markets decline expect IWM to follow suit.
The consolidation case involves oscillating around the 10 day moving average as we await an upside or downside catalyst.
To the downside, the 10 day moving average does not look particularly strong as a support level at the moment, which should shift attention to whether or not the 50 DMA is stronger, neither of which have much data for reference in terms of volume sentiment due to the extreme nature of their price.
However, something emerging on the chart is the appearance of a bearish head & shoulders pattern, which will be something to monitor given that the trough between the left shoulder & head dips down to $228.13/share.
IWM has support at the $251.05 (10 Day Moving Average, Volume Sentiment: NULL, 0:0*), $247.64 (Volume Sentiment: NULL, 0:0*), $246.70 (Volume Sentiment: NULL, 0:0*) & $245.55/share (Volume Sentiment: NULL, 0:0*) price levels, with resistance at the $251.92 (Volume Sentiment: NULL, 0:0*) & $257.34/share (All-Time High, Volume Sentiment: NULL, 0:0*) price levels.
DIA, the SPDR Dow Jones Industrial Average ETF gained +1.22% for the week, having the second strongest weekly performance.
Their RSI has plateaued & flatlined at 64.04, while their MACD is still bullish, but looking set to roll over bearish in the coming week or two (shortened week may impact this).
Volumes were -30.81% lower than the prior year’s average (2,952,500 vs. 4,267,440), which sounds alarm bells when you consider that all four sessions were advancing (sans Friday’s +0.00% returns).
Monday opened up straddling the 10 day moving average’s support, climbed higher towards the $485 level, but fell short on the day on the week’s highest volume.
Tuesday this trend continued, opening just above the 10 DMA & climbing +0.16% on the day on slightly lower volume & still closing below $485 despite temporarily breaking out above it, signaling that there is a lack of conviction of DIA above that level.
Wednesday opened slightly lower, but the Christmas spirit was alive & well rocketing DIA higher +0.57% on the day, but volume was still very low even when taking the holiday half day into consideration.
Friday the week closed on a more somber note, where low volumes continued, albeit slightly higher than Wednesday’s & a doji star formation formed, indicating that there is uncertainty & perhaps some unleashed volatility on the horizon as market participants become on edge as we near DIA’s all-time high again.
Heading into the new week the upside case involves breaking out above the all-time high, which is the only resistance level.
This, just like the cases above will require volume enhancements that are proven with time in order to be believable.
In the consolidation case, expect to see DIA oscillating around the 10 day moving average as we await a catalyst to the upside or downside.
To the downside, should a double top emerge & force prices lower the 50 day moving average is the first place to look, as it will continue climbing higher & resides in “no man’s land” in terms of volume sentiment.
If that breaks down $463.27/share is the next stop in terms of major tests, and $452.85/share should be watched closely if it is approached as it resides in a Seller zone historically.
DIA has support at the $483.05 (10 Day Moving Average, Volume Sentiment: NULL, 0:0*), $482.73 (Volume Sentiment: NULL, 0:0*), $478.73 (Volume Sentiment: NULL, 0:0*) & $473.27/share (50 Day Moving Average, Volume Sentiment: NULL, 0:0*) price levels, with resistance at the $488.60/share (Volume Sentiment: NULL, 0:0*) price levels.
The Week Ahead
Pending Home Sales Data comes out at 10 am on Monday & there are no noteworthy earnings reports due for release.
Tuesday morning brings us S&P Case-Shiller Home Price Index (20 Cities) data at 9 am, followed by Chicago Business Baromter (PMI) data at 9:45 am & the Minutes of the December FOMC Meeting at 2 pm & there are no noteworthy earnings reports scheduled.
Initial Jobless Claims data is set for release at 8:30 am on Wednesday, there will be no noteworthy earnings reports & the stock market keeps regular hours, while the bond market will close at 2pm.
Thursday if New Year’s Day & there is no economic data, nor earnings reports scheduled; Happy New Year!
There is no major economic data set for release on Friday, nor are there any earnings reports.
See you back here next week!
*** I DO NOT OWN SHARES OR OPTIONS CONTRACT POSITIONS IN SPY, QQQ, IWM OR DIA AT THE TIME OF PUBLISHING THIS ARTICLE ***