Market Analysis

SPY|QQQ Thursday 4PM 7/18/2024

July 18, 2024 3 min read

Market Sentiment Analysis

Overall Market Sentiment:

SPY (S&P 500 ETF):
The 30-minute intraday chart for SPY over the past 30 days shows pronounced movements, but a closer examination of the recent 13 bars indicates significant trading activity. The volume trends reveal a spike around the middle of the day, hitting a high at the 15:30 bar with 11,027,185 shares traded – indicating increased investor activity during that period. Recently, the price has hovered between a low of around $552 and a high of $553, suggesting a consolidation phase. Moving averages demonstrate that SPY is maintaining stability with minimal deviation, although slight upward momentum is visible.

QQQ (Nasdaq-100 ETF):
The recent 13 bars for QQQ show a similar volume spike near mid-day. The highest volume recorded is 5,964,428 shares during the 15:30 bar. Price movements have been slightly more volatile compared to SPY, with lows touching around $477 and highs nearing $481. The QQQ has shown resilience, recovering quickly from intraday dips. The moving averages reinforce this resilience, indicating the potential for upward momentum.

VXX (Volatility Index):
VXX has demonstrated notable volatility, especially the volume trends around 15:30 with a high volume of 3,369,183. Despite a significant drop to around $10.95, it quickly rebounded to close near $11.08. This pattern suggests a temporary spike in volatility which could impact SPY and QQQ if sustained. Historically, increased VXX readings have been inversely correlated with stock indices, so persistent volatility spikes could signal bearish movements.

Sector Analysis:

By evaluating all sector ETFs (XLC, XLY, XLP, XLE, XLF, XLV, XLI, XLK, XLB, XLRE, XLU), here are insights into sector performance and rotation:

Strengths:
- XLK (Technology): XLK has shown robust performance with significant volume spikes (1,138,497 at 15:30) and price surges. A bullish closing at $224.38 underscores the sector’s strength.
- XLC (Communication Services): Despite minor fluctuations, XLC has maintained stability, closing slightly higher than its intraday lows, indicating sector strength.
Weaknesses:
- XLP (Consumer Staples): XLP showed consistent downtrends, closing at $78.35 with substantial volumes indicating selling pressure.
- XLRE (Real Estate): Real Estate ETF remained subdued with lower volume activity and static prices, closing at $40.50.
Sector Rotation:
- Recent trends suggest a rotation towards defensive sectors like Utilities (XLU), highlighting sector resilience with a stable closing at $70.14, suggesting cautious investor sentiment influenced by potential macroeconomic risks.

Key Levels to Watch:

SPY:
– Support: Key support level near $550, vital to observe if selling pressures increase.
– Resistance: Immediate resistance around $555; a breakout here could spur further bullish momentum.

QQQ:
– Support: Critical support sits around $475; a break below may trigger bearish sentiment.
– Resistance: Immediate resistance around $485, breaking which could lead to bullish runs.

Scenarios:

Bullish Scenario:
For both SPY and QQQ, a bullish scenario might arise from better-than-expected economic data, robust Q2 earnings reports from major constituents, or a breakout above the mentioned resistance levels, possibly driven by technology and communication sectors.

Bearish Scenario:
Negative economic news, heightened geopolitical tensions, or a break below the support levels could lead to bearish moves. A spike in the VXX further corroborates fear and uncertainty, likely dragging down both SPY and QQQ.

Overall Commentary:

The overall market seems cautiously optimistic. Technology and Communication Services are leading while Consumer Staples struggle. VXX indicates potential volatility spikes, meriting close monitoring. Key support and resistance levels on SPY and QQQ will play a crucial role in driving short-term trading decisions. Traders should stay agile, ready to capitalize on market movements driven by upcoming economic reports or shifts in geopolitical sentiments.