SPY, the SPDR S&P 500 ETF added +0.96% this week, while the VIX closed at 15.45, indicating an implied one day movement range of +/-0.97 % & an implied one month movement range of +/-4.47%.
Their RSI is in overbought territory, currently at 72.56, while their MACD is bullish, but has flattened towards the end of the week, indicating that the trend may be losing steam.
Volumes were +31.57% above the prior year’s average (83,060,000 vs. 63,130,000), which is something to keep in mind given that the highest volume session of the week came on Wednesday’s decline.
Monday the week began on a muted, but bullish note, as the week’s second lowest volume session resulted in a gap up that was never able to break above the $660/share level.
Tuesday also opened on a gap up, but was also unable to break above the $660/share level, resulting in a declining session on slightly lower volume than Monday’s.
Wednesday opened slightly higher than Tuesday, rallied higher, but was unable to get as high as either of the past two days & profit taking resulted in a decline that temporarily went down to test the strength of the 10 day moving average’s support, but recovered higher by the end of the day to close -0.12%.
The mix of profit taking & the rally to force the close higher & mitigate the day’s losses combined to form the strongest volume session of the week around the Federal Reserve’s FOMC rate decision, matching the uncertainty Chairman Powell echoed & putting extra importance on the litany of Fed speakers this week.
Thursday opened on a gap up at $660.06, broke higher to $663.05, with a low of $658.44, before settling +0.47% on the day as a gravestone doji candle, indicating that there was waning sentiment in the bull run.
Friday also opened on a gap higher, tested & found support down by the $660/share level, and rallied higher to close +0.5% higher day-over-day on the week’s second highest volume.
It should be noted that Friday’s candle is a hanging man, and while it came on a bullish session there may be some support at these price levels, the spinning top with the lower shadow indicates that sentiment is waning & folks are becoming indecisive.
Heading into the new week, the upside case continues to be that there will need to be higher, sustained advancing volume in order to continue to set new all-time highs (such as Friday).
This is especially true now that there are some cracks showing in sentiment.
The consolidation case focuses on the $660/share level & the 10 day moving average, with prices oscillating around the two as we await an upside or downside catalyst, which will be influenced by what we hear from all of the Fed speakers (list is in last section), PCE/Core PCE, & GDP data.
Given the wide range of views on the most recent dot plot, the speakers will likely be some of the stronger clues for this week, especially given Powell’s remarks about the .25 bps being a hedge against the unseen.
The downside case now puts the $638-638.99/share support zone in the spotlight, which if it holds up can create a new consolidation range for SPY to grow from in the future after it’s built up some support.
The tricky thing here is that the zone resides in a Seller dominated zone in terms of historic volume sentiment (1.25:1) from the past ~3 years, which increases the likelihood of a breakdown.
Should that happen the $617.58/share level becomes the next line of support, which opens up a new can of worms, as the late-June unfilled gap by $600/share comes within view, as does the 200 day moving average.
There are other support levels between them, but it will begin to be on folks’ radars.
The table below lists SPY’s historic volume sentiment by price level for the past ~3 years.
SPY has support at the $655.61 (10 Day Moving Average, Volume Sentiment: NULL, 0:0*), $638.88 (50 Day Moving Average, Volume Sentiment: Sellers, 1.25:1), $638.08 (Volume Sentiment: Sellers, 1.25:1) & $617.58/share (Volume Sentiment: Buyers, 1.8:1) price levels, with resistance at the $664.55/share (All-Time High, Volume Sentiment: NULL, 0:0*) price levels.
QQQ, the Invesco QQQ Trust ETF advanced +2.16% for the week, having the strongest weekly performance of the four major indexes.
Their RSI is in overbought territory, currently at 73.69, while their MACD is bullish.
Volumes were +32.04% higher than the prior year’s average (53,990,000 vs. 40,888,446), which based on Friday’s performance signals that there is some hesitency for QQQ components compared to SPY’s performance.
Monday the week began on a gap up, bringing QQQ to above the $590/share level on the second lowest volume of the week.
Tuesday opened on another gap higher, but enthusiasm fell, as did QQQ on the week’s lowest volume.
Wednesday opened on a gap lower, tested higher, before giving out to go test the support of the 10 day moving average, but managing to recover -0.2% down for the day on the week’s highest volume.
Again, much like SPY the profit taking pre-FOMC announcement & the subsequent rally after its conclusion created said volume, indicating that there is a lot of uncertainty among market participants.
Thursday this uncertainty began to show, as a gap up open tested higher to the $597.45/share level, but retreated throughout the day & closed as a tight spinning top that closed below its opening price.
The indecision signaled there shows that caution has entered the market for QQQ & its components.
Friday opened again on another gap up, temporarily crossed $600/share, but closed +0.68% higher on the day at $599.35/share.
As we move forward, recall that in weeks’ prior notes it has been mentioned that QQQ is currently leading SPY, making it important to watch the moves of both, which adds more importance to the volume heading into the weekend trend.
SPY’s advanced heading into the weekend, while QQQ’s Friday volume did not reflect the same enthusiasm as Thursday’s volume level, which may be market participants growing weary at such high levels.
Heading into the new week the upside case continues to be the same as before for months & in SPY’s, new all-time highs will continue but they’ll need sustainable advancing volume behind them to continue driving higher.
The upside level of $600/share will be of importance though, as to carry higher it must be broken through & in the case of consolidation it will also be a point to watch.
In the consolidation case, QQQ is likely to oscillate between the $600/share level & the 10 day moving average ($587.83) while awaiting the next major upside/downside news catalyst.
The downside case for QQQ is important to watch, with the strength of the 10 DMA’s support being the first major test.
This price zone has limited volume sentiment data available at the moment, so the approach to the 10 DMA will be interesting to lend clues into whether or not there is untold Buyer sentiment, or if the Sellers are out waiting to take profits & run.
Should it break down, the 50 DMA comes into play, as does eyes on the unfilled gap from early September, especially given that there is elevated Seller entiment all around it, Per the table below.
QQQ has support at the $587.83 (10 Day Moving Average, Volume Sentiment: NULL, 0:0*), $583.32 (Volume Sentiment: Buyers, 2:0*), $574.63 (Volume Sentiment: Buyers, 1.79:1) & $571.86/share (50 Day Moving Average, Volume Sentiment: Buyers, 1.79:1) price levels, with resistance at the $600.05/share (All-Time High, Volume Sentiment: NULL, 0:0*) price levels.
~1 Year
IWM, the iShares Russell 2000 ETF gained +1.95%, having the week’s second strongest performance among the four majors.
Their RSI is coming back from overbought levels following Friday’s session & is at 66.73, while their MACD is bullish, but flat following Thursday & Friday’s sessions.
Volumes were +62.75% higher than the prior year’s average (51,058,000 vs. 31,372,430), which paints a mixed picture in terms of broader sentiment, particularly given that IWM just reached a new all-time high.
Monday IWM kicked off higher, but resulted in a thin spinning top candle on the week’s thinnest volume, which did not inspire confidence & showed that market participants felt uneasy.
Tuesday opened lower, tested down to the support of the 10 day moving average, before rallying higher but still closing the day down -0.16%.
Wednesday opened on a gap higher & had quite the intraday whipesaw, testing as low as $272.02 & the 10 DMA’s support & as high as $244.28, before settling only +0.26% for the day.
An argument an be made that Wednesday’s highest volume of the week due to intraday pumps & profit taking is a gravestone doji, which carries negative bearish sentiment into the new week, which will be an area of focus.
Thursday opened on a gap higher & managed to push beyond the high of Wednesday as there was strong short-term euphoria pulling IWM higher on the week’s third highest volume.
Friday though is where things began to unwind, as after a gap up open, profit taking took over & IWM slumped -0.76% on the second highest volume of the week, which is not an indicator of near-term confidence.
The upside case for IWM continues as it’s been, particularly as they’re at all-time highs, they’ll keep following the larger indexes higher at a subdued pace, as the risks associated with small cap names are not considered advantegeous to larger caps in this current rate environment.
The consolidation case focuses on the range between the all-time high & the 10 day moving average, with oscillations occurring between them establishing a base that could provide additional support higher in the event of an upside catalyst.
The downside case becomes interesting, as the appetite is clearly there & IWM’s spent much of the past two months & beyond straddling the 10 day moving average.
When that breaks down, the 50 day moving average & the $228.90/share level will become important areas of interest.
Much of their historic sentiment from the past ~2-3 years has been Buyer orienteuntil their $219.99/share level, which brings questions of how strong those levels above & the $223.97-226.07/share support zone will be, as we may see their ratios dilute with increased Seller Senitment, forcing a breakdown, or at best a consolidation range similar to the support levels mentioned.
IWM has support at the $242.35 (Volume Sentiment: Buyers, 0.4:0*), $239.79 (Volume Sentiment: Buyers, 2.1:1), $239.10 (10 Day Moving Average, Volume Sentiment: Buyers, 2.1:1) & $228.90/share (Volume Sentiment: Buyers 1.27:1) price levels, with resistance at the $245.57/share (All-Time High, Volume Sentiment: NULL, 0:0*) price levels.
DIA, the SPDR Dow Jones Industrial Average ETF fared the worst of the majors, climbing only +0.79% for the week.
Their RSI is climbingtowards the overbought 70 mark & is currently at 66.15, while their MACD is bullish, but flat & its histpgram has been undulating for much of September, which indicates uncertainty.
Volumes were +63.38% higher than the prior year’s average (5,588,000 vs. 3,420,199), with much of it coming from the last three sessions of the week, which had the highest volumes.
Monday opened up DIA’s week with a bullish harami cross, but the day only resulted in +0.16% in returns, so hesitency was showing.
Tuesday’s candle resulted in a bearish engulfing candle, as profits taking took place the day before the FOMC announcement, and the 10 day moving average’s support was tested but prevailed.
Wednesday also saw a test of the 10 DMA, which held up & the day resulted in a high wave spinning top, showing that markets could move in any direction to a fair degree, but that folks were still buying after Powell’s Press Conference.
Thursday the highest volume session of the week opened higher, retraded in Wednesday’s range, before springing higher to $463.05/share, before profit takers stepped in forcing the price down to close at $461.31, +0.3% on the day.
The highest volume session having such a high upper shadow but the body concentration being towards the bottom of the candle showed that the bears have begun to step in more aggressively.
Friday the week wound down with a gap up open that retraced all the way down to into Thursday’s real body, but managed to close as a thin hanging man, indicating that the end of the line is likely near for DIA or at least a short-term breather as the bulls barely squeeked by with much beyond the gap in terms of day-over-day gains.
Heading into the new week, the upside case remains the same, more all-time highs will need sustained higher levels of advancing volume before markets lose steam.
The consolidation case focuses around DIA oscillating around its 10 day moving average until there’s an upside or downside catalyst.
To the downside, once the 10 DMA breaks down, $448.49(50 DMA)-448.70 & $445-445.28 are key areas of support to watch, especially given that they are the gatekeepers to $443.99/share, which is when DIA enters back-to-back Seller dominated zones, as shown on the chart below.
Given that DIA tends to be more Buy & Hold type of names, a decline may be more forceful than anticipated if folks are liquidating long-held positions in favor of cash & safer assets than the blue chip index components.
DIA has support at the $458.53 (10 Day Moving Average, Volume Sentiment: NULL, 0:0*), $448.70 (Volume Sentiment: Buyers, 2.09:1), $448.49 (50 Day Moving Average, Volume Sentiment: Buyers, 2.09:1) & $445.28/share (Volume Sentiment: Buyers, 2.24:1) price levels, with resistance at the $463.78/share (All-Time High, Volume Sentiment: NULL, 0:0*) price levels.
The Week Ahead
Monday the week begins with Fed President Williams speaking at 9:45 am, Fed President Musalem speaking at 10 am & Fed Governors Miran, Hammack & Barkin speaking at 12 pm, and there are no major earnings reports.
More Fed speakers are on deck for Tuesday, including a speach from Vice Chair of Supervision Bowman at 9 am, S&P Flash U.S. Services PMI & S&P Flash U.S. Manufacturing PMI data at 9:45 am & Fed Chair Powell speaking at 12:35 pm.
Tuesday morning begins with earnings from AutoZone, followed by AAR, Micron, MillerKnoll & Worthington Enterprises after the closing bell.
Wednesday brings us New Home Sales data at 10 am, followed by Fed President Daly speaking at 4:10 pm.
Cintas & Thor Industries report earnings before Wednesday’s opening bell, before H.B.Fuller, KB Home, Steel case, Stitch Fix & Worthington Steel.
Fed President Goolsbee speaks at 8:20 am Thursday, before Initial Jobless Claims, GDP (third estimate), Advanced U.S. Trade Balance In Goods, Advanced Retail Inventories, Advanced Wholesale Inventories, Durable-Goods Orders & Durable-Goods minus Transportation data at 8:30 am; Fed President Williams speaks at 9 am, followed by Fed Vice Chair of Supervision Bowman speaking & Existing Home Sales data at 10 am, Fed Govrnor Barr speaking at 1 pm, Fed President Logan speaking at 1:40 pm & Fed President Daly speaking at 3:30 pm.
Thursday morning kicks off with earnings from Accenture, CarMax, Jabil & TD Synnex, before Costco Wholesale, BlackBerry & Concentrix report following the closing bell.
Friday the week rounds out with Person Income, Personal Spending, PCE Index, PCE (Year-over-Year), Core PCE Index & Core PCE (Year-over-Year) data at 8:30 am, followed by Fed President Barkin speaking at 9 am, Consumer Sentiment (final) data at 10 am & Fed Vice Chair for Supervision Bowman speaking at 1 pm & all is quiet on the earnings front heading into the weekend.
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 ***