Market Analysis

SPY|QQQ Thursday 4PM 8/15/2024

August 15, 2024 4 min read

Market Sentiment Analysis

Overall Market Sentiment:

SPY (S&P 500 ETF):
On the 30-minute intraday chart for the past 30 days, SPY has exhibited a generally bullish trend, characterized by a series of higher highs and higher lows. However, focusing on the most recent 13 bars, we observe a period of consolidation. The closing price in this timeframe has largely hovered between $552.45 and $553.36, with significant volume spikes on the 10th and 13th bars. The 50-period and 200-period moving averages (MAs) on the 30-minute chart have started to flatten, indicating potential indecision in the market. A notable price movement is the slight upward trend in the final few bars, indicating bullish momentum, but the volume doesn’t significantly support the move.

QQQ (Nasdaq-100 ETF):
The QQQ has shown similar patterns to SPY on the 30-minute intraday chart. Over the recent 13 bars, QQQ is consolidating around the $474.28-$474.49 range. The volumes have spiked notably in the 10th and 13th bars, suggesting significant interest but no strong directional movement. The 50-period and 200-period MAs have also flattened, suggesting a potential build-up to a move rather than trending behavior. Slight bullish momentum is noted at the end, but like SPY, it’s not heavily supported by volume.

VXX (Volatility Index ETF):
VXX has been relatively quiet with slight downward pressure over the recent bars. The spike in volume during the 10th and 13th bars indicates some increased interest, but overall, the VXX remains in a low-volatility state. This suggests a current market sentiment of calm, with investors not aggressively hedging against downside risk. This low VXX level could be interpreted as a bullish sentiment for SPY and QQQ in the short term, with lower perceived market risk.

Sector Analysis:

Strong Sectors:
– XLC (Communication Services): Shows slight upward momentum with consistent volume, particularly holding well above $86.
– XLK (Technology): Strong and consistent performance, closing higher frequently with robust volume.
– XLV (Health Care): Also performing relatively well, slight upwards with healthy volume.

Weak Sectors:
– XLF (Financials): Struggling to maintain price levels, several downward pressures with volume spikes.
– XLRE (Real Estate): Consistent volume but slight declining pattern indicating weaker sentiment.

Sector rotation suggests a movement into defensive stocks as well as technology, hinting at cautious optimism in growth sectors amidst broader risk concerns.

Key Levels to Watch:

SPY:
– Support: $552.45 – Near-term support level identified in the consolidation range.
– Resistance: $553.36 – Key resistance within the consolidation range. A breakout above this could be bullish.

QQQ:
– Support: $473.83 – Key support level within recent price action.
– Resistance: $474.82 – Important resistance barrier, a close above this is bullish.

Scenarios:

Bullish Scenario:
– SPY and QQQ: A bullish scenario would involve breaking above the mentioned resistance levels ($553.36 for SPY and $474.82 for QQQ). Positive economic data, strong earnings reports, or a marked decrease in VXX could drive this breakthrough. A simultaneous uptick in leading sectors like Technology (XLK) and Communication Services (XLC) would further support this scenario.

Bearish Scenario:
– SPY and QQQ: If both ETFs fall below their key support levels ($552.45 for SPY and $473.83 for QQQ), this could signal a bearish trend. Negative economic news, geopolitical tensions, or rising VXX levels would support this scenario. Watch for Financials (XLF) and Real Estate (XLRE) for increased weakness, which could add to downward pressure.

Overall Commentary:

The market is currently in a consolidation phase, indicated by narrowing price ranges and flat moving averages in both SPY and QQQ. With VXX at low levels, investor sentiment is cautiously optimistic but not aggressively bullish. Sector rotation suggests a lean towards tech and defensive sectors, indicating cautious positioning. Traders should keep an eye on the identified support and resistance levels in the coming days for potential breakout or breakdown signals.