Market Analysis

SPY|QQQ Monday 1PM 6/03/2024

June 3, 2024 4 min read

Market Sentiment Analysis

Overall Market Sentiment

SPY (S&P 500 ETF):
Analyzing the 30-minute intraday chart for SPY over the past 30 days, today’s recent 13 bars reveals a mixed but relatively stable sentiment. The volume has been high during drops, particularly evident from 11:30 to 12:30, suggesting a probable distribution phase. Prices have been consistently testing support levels around 523, which could indicate weakening momentum. The last few bars show a slight recovery but on lower volume, pointing to cautious optimism among traders. Moving averages (MA) are near converging points, often indicative of potential volatility ahead.

QQQ (Nasdaq-100 ETF):
When examining QQQ, there’s a noticeable downward trend with weakening support similar to SPY. The recent 13 bars show high volume on drops, particularly between 12:00 and 12:30, indicating strong selling pressure. The recovery attempt in the latest bars lacks the volume needed to establish a robust bounce. Moving averages are beginning to diverge, suggesting a continuation of this downtrend might be likely if no significant buying momentum returns.

VXX (Volatility Index):
The VXX chart demonstrates steady spikes and troughs with notable intraday volatility, peaking during key drops in SPY and QQQ. The increase in VXX volume during drops in SPY and QQQ indicates elevated fear and uncertainty among investors. Stability in VXX over the last few bars, despite high volumes, might be a precursor to a market reversal or further consolidatory phase.

Sector Analysis:

Strong Sectors:
- XLV (Healthcare): Healthcare has remained relatively stable with a support base forming around 144, showing resilience compared to broader market weaknesses.
- XLU (Utilities): Utilities show strength, holding its ground with minor fluctuations around the 71-72 levels. It’s attracting defensive investors during periods of high uncertainty.
Weak Sectors:
- XLE (Energy): Energy has shown consistent drops with the last few sessions indicating minor recoveries lacking strong momentum.
- XLF (Financials): Financials are clearly on a downward trajectory; heavy volumes on declines suggest sector-wide risk-off sentiment.

The overall sector rotation signifies a shift towards defensive plays (Utilities and Healthcare), away from cyclical and high-beta sectors like Energy and Financials, reflecting increasing risk aversion in the market.

Key Levels to Watch:

SPY:
– Support: 522-523 region is critical; a break below this could accelerate selling pressure.
– Resistance: 526.6 marks a near-term resistance. Sustainable break above this level could signal a bullish reversal.

QQQ:
– Support: 447-448 levels are critical; failure to hold could see a quick drop towards 445.
– Resistance: 452.75 is the key resistance. Closing above this could spark a fresh wave of buying.

Scenarios:

Bullish Scenario:
For SPY and QQQ, a bullish scenario could unfold if there are positive economic data releases (e.g., improved job numbers), strong earnings surprises, or a technical breakout above key resistances (526.6 for SPY, 452.75 for QQQ). A convergence of MAs could also propel a bullish crossover momentum.

Bearish Scenario:
A bearish scenario may play out if poor economic indicators emerge, unexpected geopolitical tensions escalate, or if there’s a technical breakdown below key supports (522-523 for SPY, 447-448 for QQQ). Extensive volume spikes in VXX would further confirm investor fears pushing the market lower.

Overall Commentary:

Current market sentiment appears to be cautious with a slight bearish bias, driven by pronounced sector weaknesses and heightened volatility as indicated by VXX patterns. Defensive sectors are outperforming, suggesting a risk-off approach by investors. Watching the key levels in SPY and QQQ closely is imperative as the market looks susceptible to higher volatility and potential downside given the prevailing sentiment. Traders should be prepared for both potential breakouts or breakdowns and align their strategies accordingly.