Market Analysis

SPY|QQQ Monday 8AM 8/05/2024

August 5, 2024 4 min read

Market Sentiment Analysis

Overall Market Sentiment:

SPY (S&P 500 ETF):
In examining the 30-minute intraday chart of the SPY for the past 30 days with a focus on the most recent 13 bars, notable observations include:

Price Movements:
- Recent price action shows a slight pullback from the highs with significant intraday volatility.
- Specifically, the last few bars indicate a sharp decline with a large volume spike, especially on the 8:00 am bar, where the price decreased from 518.53 to a low of 512.71 before recovering slightly to 513.20.
Volume Trends:
- There is a noticeable increase in volume during the decline, suggesting a potential reversal or profit-taking by traders.
Moving Averages:
- Short-term moving averages (e.g., 9 or 13 period) may be converging or crossing over downward, indicating a potential bearish short-term sentiment.

QQQ (Nasdaq-100 ETF):
Analysis of the 30-minute intraday chart of QQQ also shows similar patterns:

Price Movements:
- QQQ saw a sharp decline from 430.46 to 424.95 within a single bar before closing at 425.17.
- Similar to SPY, there’s significant volatility with sharp intraday movements, which can be indicative of uncertainty or jitteriness in the market.
Volume Trends:
- Increased volume during the downturn supports the bearish sentiment in the short term, with high trading activity during the sharp price drop.
Moving Averages:
- Like SPY, convergence of short-term moving averages may be pointing to bearish momentum in the very short term.

VXX (Volatility Index):
The VXX data indicates a rise in volatility with significant spikes observed:

Price Movements:
- VXX sharply increased from a low of 76.42 to 88.60 in intraday trading, closing at 88.54, indicating a substantial rise in anticipated market volatility.
Volume Trends:
- High trading volumes correspond to the price spikes, further indicating a shift towards risk-off behavior by investors.

Given the spike in VXX, combined with the observed price and volume trends in SPY and QQQ, the market sentiment appears to be leaning towards caution with increased volatility expected.

Sector Analysis:

Performance Overview:
1. Strong Sectors:
– XLP (Consumer Staples): Demonstrated relative stability with less volatility compared to others, indicating a potential defensive play.
– XLU (Utilities): Stable price action, often considered a safe haven in uncertain times, supporting the cautious market sentiment.

Weak Sectors:
- XLY (Consumer Discretionary): Showed greater volatility and sharp declines, reflecting reduced consumer confidence or spending expectations.
- XLK (Technology): Significant price volatility with recent large drops, indicating profit-taking or uncertainty in growth sectors.

Sector Rotation:
– There seems to be a rotation from cyclicals and growth-oriented sectors into more defensive sectors like Utilities and Consumer Staples, suggesting a cautious outlook.

Key Levels to Watch:

SPY:
1. Support Levels:
– 513.00: Immediate support after the recent pullback.
– 508.00: Deeper support that could be tested if bearish momentum continues.

Resistance Levels:
- 520.50: Recent high which will be a critical resistance for any rebound.
- 525.00: Longer-term resistance indicating more bullish sentiment if broken.

QQQ:
1. Support Levels:
– 425.00: Immediate support which, if breached, could lead to further declines.
– 420.00: A stronger support level below which significant bearish sentiment could prevail.

Resistance Levels:
- 435.00: Recent high and key resistance to watch for any bullish reversal.
- 440.00: Longer-term resistance level.

Scenarios:

Bullish Scenario:
– For SPY and QQQ, a potential bullish scenario would be driven by:
– Positive Economic Data: Better-than-expected GDP growth or employment data.
– Strong Earnings Reports: Earnings beats from major companies could boost sentiment.
– Technical Breakouts: SPY breaking above 520.50 and QQQ above 435.00 could spark buying interest.

Bearish Scenario:
– Conversely, a bearish scenario could be triggered by:
– Negative Economic News: Unexpected poor economic data or downward revisions in growth.
– Geopolitical Tensions: Escalations in global conflicts or trade issues.
– Technical Breakdowns: SPY falling below 513.00 and QQQ below 425.00 would confirm bearish sentiment.

Overall Commentary:

Current market sentiment leans on the cautious side with increased volatility observed in recent trading sessions. Defensive sectors like Consumer Staples and Utilities demonstrate relative strength, indicating a shift towards risk-averse positioning. Critical support and resistance levels for SPY and QQQ suggest heightened awareness of potential breakout or breakdown scenarios in the very short term. Traders should be vigilant for abrupt news that could sway market sentiment quickly either way.