SPY, the SPDR S&P 500 ETF edged higher +0.14%, while the VIX closed at 19.83, indicating an implied one day move range of +/-1.25% & an implied one month move range of +/-5.73%.
Their RSI is flat, sitting just beneath the neutral 50-level at 48.27, while their MACD is still bearish & trending below the signal line over the past two weeks.
Volumes were +16.25% higher than the prior year’s average (79,482,000 vs. 68,374,480), which remains a cause for concern, particularly this week as the top two highest volume days were on declines & eclipse the advancing days.
The week opened on a gap up on the highest advancing volume of the week (but still didn’t hold a candle to Thursday & Friday’s declining volume), opening just below the 10 day moving average’s resistance.
SPY headfaked lower temporarily, before mustering up some steam, breaking out above the 10 DMA & managing to close above it, which had been elusive the prior four sessions.
Tuesday opened slightly lower, but in-line with the 10 DMA waiting to decide to continue marching higher or if the support broke down; the bulls won & the charge carried forward.
Observing that this was the lowest volume session of the week, there’s a great degree of hesitency in the air, if not some outright pockets of fear emerging.
Wednesday confirmed this, on a gap up open that quickly turned foreboding, as bears rushed in, profits were taken (along with risk off of the board) & SPY made a downward run at the support of the 10 DMA.
It was able to recover some of the losses though, but still closed below its opening price as a hanging man candle, carrying particularly bearish implications.
Low volume gap up is usually not a great sign if you’re assessing conviction among market participants, and the lower close than opening price on weak volume all combine to paint a picture that’s not very bright.
Confirmation arrived Thursday, when a high volume session began on a gap lower, breaking through the support of & not looking back to the 10 DMA, with a lower shadow that showed that there was still bearish appetite.
This became quite self evident when Friday opened below the resistance of the 50 day moving average (which was -1.3% below the 10 DMA), head faked lower, but managed to climb higher & break out above the 50 DMA’s resistance.
It was however, unable to retest the 10 day moving average’s resistance, indicating that the short-term trend is not SPY’s-friend at the moment.
The bullish case heading into the weekend echos similar to last week’s, the 10 DMA has to be broken above & some stronger advancing value sessions more consistently may see a shot at a new all-time high.
Closing a Monday gap up on a Friday does not give the impression of much strength, so we’ll need some news to hopefully provide an upwards catalyst.
The consolidation case is similar to what the week showed us already, there’ll be oscillations around & in between the 10 & 50 day moving averages while we await an upside or downside catalyst.
Should we see a downside catalyst, the 50 DMA’s support is first priority, especially given Friday opened below it & managed to close higher than it heading into the weekend.
If it breaks down the next couple of months look very interesting, as there are three support levels currently separating the 50 & 200 DMAs, and two of them historically are Seller Zones (1.57 & 2:1), which could bring the long-term trendline into view.
It also then opens up the filling of the window from June 2025 discussion as a possibility, which would cause the 200 DMA to break down.
SPY has support at the $668.15 (50 Day Moving Average, Volume Sentiment: Buyers, 2.55:1), $661.21 (Volume Sentiment: Buyers, 1.58:1), $653.17 (Volume Sentiment: Sellers, 1.57:1) & $638.08/share (Volume Sentiment: Sellers, 2:1) price levels, with resistance at the $673.95 (Volume Sentiment: Buyers 2.5:1), $676.92 (10 Day Moving Average, Volume Sentiment: NULL, 0:0*), $684.96 (Volume Sentiment: NULL, 0:0*) & $689.70/share (All-Time High, Volume Sentiment: NULL, 0:0*) price levels.
QQQ, the Invesco QQQ Trust ETF shed -0.14% on the week, as the tech darlings have begun to fall out of favor with market participants.
Their RSI is flat as well, just beneath the neutral 50-mark & sits currently at 46.64, while their MACD has been below their signal line bearishly for two weeks, with a strong looking histogram behind the bearish sentiment.
Volumes were +31.55% higher than the prior year’s average levels (59,930,000 vs. 45,557,560), which has a different layout, but similar sentiment from Friday’s squeeze higher prior to this week’s NVDA earnings, Fed Speakers & return to having government provided economic data as the government has reopened.
Monday saw a similar gap up open as SPY had, some quick profit taking provided a small lower shadow & QQQ ran up to just beneath the resistance of the 10 DMA, indicating that they’re also in a bearish short-term trend.
Tuesday created an interesting set up, opening within Monday’s real body, ducking lower to make a higher low, before closing higher, technically as a hanging man that opened higher than it closed, in a bearish harami pattern on the week’s lowest volume.
Well, Wednesday didn’t offer much more either, minus telling us that the short-term trendline is limiting QQQ & rejecting it back, as QQQ opened on a gap higher above the 10 DMA, sunk below it & wound up closing in-line with it.
Thursday showed there was no more gas in the tank & QQQ opened below the 10 DMA’s resistance & carried lower to bounce off of the 50 day moving average’s support, but close just above it.
Friday opened on a gap lower to below the 50 DMA’s support, tested slightly lower, but found footing & broke out back above the 50 DMA & managed to close above it.
Upper shadow indicates that there is some appetite slightly higher, but the 10 DMA is likely going to reign supreme without some type of major upside catalyst.
If they do manage to run higher beyond the 10 DMA it’s two stops to a new all-time high.
The consolidation case looks more likely when you consider that the 10 DMA focuses on short-term risks across the board, not just on a major company, but to make the run higher sustainable a lot of advancing volume needs to be seen & not just in a one or two session instance..
In the event of consolidation, this past week somewhat set the stage for the range, oscillating in between & around the 10 & 50 day moving averages, which are only -1.97% apart & could apply some downwards pressure.
Now should that occur & we see a downside case emerge, QQQ has more local support levels separating them from their 200 day moving average than SPY, which is beneficial, but also may reflect over exuberance in tech companies.
If the 50 DMA gives out, we see the next support levels in a Seller zone (1.17:1) over the past year, and the next one is $0.13 above another Seller zone at $585-589.99, where the Seller ratio is 3.14:1, that’s likely to provide downwards pressure.
That would make the $582.64-level the next place to watch, in the event of a downside move like that.
QQQ has support at the $605.72 (50 Day Moving Average, Volume Sentiment: Buyers, 2.2:0*), $598.67 (Volume Sentiment: Sellers, 1.17:1), $590.13 (Volume Sentiment: Buyers, 1.04:1) & $582.64/share (Volume Sentiment: Buyers, 2.5:0*) price levels, with resistance at the $613.18 (Volume Sentiment: Buyers, 1.17:1), $617.92 (10 Day Moving Average, Volume Sentiment: NULL, 0:0*), $624.86 (Volume Sentiment: NULL, 0:0*) & $637.01/share (All-Time High, Volume Sentiment: NULL, 0:0*) price levels.
IWM, the iShares Russell 2000 ETF declined -1.71%, as the small cap index had the worst of the major four.
Their RSI has flattened out halfway between the neutral 50-mark & oversold territory, sitting currently at 41.11, while their MACD continues on in bearish territory, as it has since late September.
Volumes were +29.32% higher than the prior year’s average (43,438,000 vs. 33,589,000), which was primarily fueled by Thursday & Friday’s sessions.
Monday kicked the week off in a similar fashion to SPY & QQQ with a gap up open that was in-line with the 10 day moving average, before breaking down to run at the 50 day MA’s support, which held up.
However, despite running back some of the day’s losses, IWM still closed the day as a hanging man candle that closed lower than it opened, showing continued bearishness on the horizon.
Tuesday opened lower just above the 50 day moving average, broke the support of it briefly, but then rallied higher to briefly break out above the 10 DMA’s resistance, only to settle down & close in-line with it.
Wednesday is when trouble began to really be signaled, as the morning opened higher, tested to $246.38, but then sank for a loss of -0.25%, resting just atop the 10 DMA bearishly crossing through the 50 DMA at the close.
Thursday it all began to unwind, with IWM opening on a gap lower to beneath both moving averages, making a run up at them but not breaking through theresistance & getting sent down for a loss of -2.81% on the highest volume of the week, as fear & panic had set into the small cap index.
Friday opened on a gap lower, but was squeezed higher throughout the day to head into the weekend on an cautiously optimistic note on the week’s second highest volume.
Looking tot he week ahead, the upside case involved IWM breaking out above both the 10 & 50 day moving averages’ resistance levels, which while they are close to one another, will likely require a gap that receives ample fuel to tread water above/climb higher, as there is clearly bearish sentiment congested in there.
The consolidation case revolves around the range created by Friday’s candle, with some space to the top & bottom of it while the 10 & 50 DMA’s catch up with market participants & IWM’s share price – to the upside the $237.55/56 level will cap the range.
The downside case gets interesting, as the $236.27/share level is the nearest support, before nothing until $228.90, a loss of -3.12%, which sits atop a small support zone before the 200 day moving average comes into near-view.
Watch the other major indexes in this note for insight into where IWM may go, as the small cap names are likely to follow them or decline further under the current market conditions.
The table below lays out historic volume Sentiment for IWM & may be helpful in gauging the strength/weakness of support/resistance levels.
IWM has support at the $236.27 (Volume Sentiment: Buyers, 1.56:1), $228.90 (Volume Sentiment: Buyers, 1.58:1), $226.07 (Volume Sentiment: Buyers, 1.07:1) & $225.40/share (Volume Sentiment: Buyers, 1.07:1) price levels, with resistance at the $237.55/6 (2 Touch-Points, Volume Sentiment: Buyers, 1.56:1), $240.76 (Volume Sentiment: Buyers, 2.19:1), $241.95 (10 Day Moving Average, Volume Sentiment: Buyers, 2.19:1) & $242.35/share (Volume Sentiment: Buyers, 2.19:1) price levels.
DIA, the SPDR Dow Jones Industrial Average ETF advanced +0.41%, faring the strongest of the major four index ETFs.
Their RSI is heading downwards towards the neutral 50-mark, currently at 51.29, while the MACD dipped bearishly under the signal line on Friday, forming on the histogram what somewhat resembled a middle finger, at what may prove to be an interesting juncture.
Volumes were +87.45% higher than the prior year’s average (7,442,000 vs. 3,970,160), which appears to possibly be a flight from the “Buy & Hold” investment thesis, given the nature of the blue chip names & will be an important reason to be watching DIA’s volume trends in the coming weeks.
DIA opened the week on a gap higher, retesting back down to the $470/share level & rallying higher to close in-line with the 10 day moving average on the week’s second lowest volume.
Tuesday saw the 10 DMA’s resistance break down & DIA ran for the $480/share level (unsuccessfully), on the lowest volume of the week, indicating that market participants had become a bit nervous & just collecting profits while they can, but the side of the day’s range with that low of volume did not reflect confidence.
Wednesday opened on a gap up, ran higher, but the bears came in for their profits & risk management before the $485/share level was reached & a shooting star emerged, indicating bearishness had stepped into the building.
Sure enough, Thursday followed suit & managed to retrace most of Wednesday’s candle’s real bodyq before the ladder got kicked out from under it & the next stop on the elevator down was the 10 day moving average’s support.
Thursday also had the second highest volume of the week, which really shows the weakness behind Tuesday’s gain in terms of lack of faith/short-term breakdown emerging.
Friday opened on a gap down to below the 10 DMA’s support, made a run higher, unable to test the resistance level, while also making a similar sized break lower, before closing as a doji candle.
This signal of bearish uncertainty paints an interesting picture heading into the weekend.
The upside case now is an interesting question, as they have just made another all-time high this week, but have also shown weakness regarding their short-term trend line, making the 10 DMA the first place to be watching, anticipating it to be support & that there’s some strong volume behind it.
If that passes, there’ll either be a tight head & shoulders emerging, else all eyes go to that all-time high.
The consolidation case could emerge here, oscillating between the 10 & 50 DMAs & filling Monday’s window from the gap up open, else a brief up move will show the strength of the 10 DMA & lead the two lines closer together.
The downside case requires a similar strength, but of support coming from the 50 day moving average.
If it can hold up there may be a leg-lower consolidation while we await to see the bearish 10 & 50 DMA crossover, but with such little faith in the short-term trend & it’s current curl, one must be vigilant for gap down opens.
After that, the $454.41 support levels becomes a primary target, as it resides in a Seller Zone (1.1:1).
From there to the downside, there is the $448.55/share level & then the 200 DMA, which also resides in a Seller Zone (1.65:1), which brings the long-term trend of the blue chip index into question.
DIA has support at the $470.22 (Volume Sentiment: NULL, 0:0*), $465.97 (50 Day Moving Average, Volume Sentiment: Buyers, 1.9:1), $464.86 (Volume Sentiment: Buyers, 1.9:1) & $454.41/share (Volume Sentiment: Sellers, 1.1:1) price levels, with resistance at the $473.91 (10 Day Moving Average, Volume Sentiment: NULL, 0:0*), $480.39 (Volume Sentiment: NULL, 0:0*) & $484.39/share (All-Time High, Volume Sentiment: NULL, 0:0*) price levels.
The Week Ahead
Monday the week kicks off with Empire State Manufacturing Survey data at 8:30 am, Fed Vice Chair Jefferson speaks at 9 am, Fed President Kashkari speaks at 1 pm & Fed Governor Waller speaks at 3:35 pm.
Aramark, Brady, J&J Snack Foods & JinkoSolar all report earnings before Monday’s opening bell, before LifeMD & Trip.com Group report after the session’s close.
Import Price Index & Import Price Index minus Fuel data come out at 8:30 am on Tuesday, followed by Industrial Production & Capacity Utilization data at 9:15 am, Home Builder Confidence Index data at 10 am, Home Builder Confidence Index data at 10 am & Fed Governor Barr speaking at 10:30 am.
Tuesday morning’s earnings reports feature results from Aecom Tech, Amer Sports, Baidu, BellRing Brands, Energizer, Home Depot, James Hardie, Klarna Group, Medtronic, Oaktree Specialty Lending & Weibo, with Dolby Labs, Golub Capital, Helmerich & Payne, La-Z-Boy, Powell Industries & Sociedad Quimica y Minera reporting after the closing bell.
Wednesday morning features Philadelphia Fed Manufacturing Survey data, Housing Starts & Building Permits data at 8:30 am, before Minutes of October’s FOMC Meeting are published at 2pm.
Birkenstock Holding, Bullish, Dycom, GDS Holdings, Global-E Online, Kingsoft Cloud, Lowe’s, Target, TJX, Viking Holdings & Wix.com all report earnings before Wednesday morning’s opening bell, before NVDA, BrightView, Copa Holdings, Jack In The Box, Kulicke & Soffa, NANO Nuclear Energy, NJ Resources, ODDITY Tech, Palo Alto Networks & ZTO Express all report after the closing bell.
Initial Jobless Claims data comes out at 8:30 am Thursday, followed by Existing Home Sales & U.S. Leading Economic Indicators data at 10 am, Fed Governor Cook speaking at 11 am, Fed President Goolsbee speaking at 1:40 pm & Fed President Paulson speaking at 6:45 pm.
Thursday’s earnings reports kick off with Walmart, Atkore International, Bath & Body Works, Construction Partners, Jacobs Solutions, Magnera, MAXIMUS, Shoe Carnival, Vipshop & Warner Music Group, before we hear results from Elastic, Esco Tech, Gap, Intuit, Post, Ross Stores, UGI, Veeva Systems & Webull following the session’s close.
Friday winds the week down with Fed Governor Barr speaking at 8:30 am, Fed Vice Chair Jefferson speaking at 8:45 am, Fed President Logan speaking at 9 am, S&P Flash U.S. Services PMI & S&P Flash U.S. Manufacturing PMI data at 9:45 am & Consumer Sentiment (final) data at 10 am.
BJ’s Wholesale, Buckle & Moog all report earnings before Friday’s opening bell.
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 ***