Market Analysis

SPY|QQQ Wednesday 1PM 7/31/2024

July 31, 2024 4 min read

Overall Market Sentiment

SPY (S&P 500 ETF):
Examining the 30-minute intraday chart for the past 30 days and emphasizing on the most recent 13 bars:
– Volume Trends: Recent volume trends indicate a slight increase, with notable spikes during certain intervals suggesting active trading and potential accumulation phases.
– Moving Averages: The SPY has been trading above its 50-period moving average, which aligns with a recent bullish sentiment.
– Notable Price Movements: Price action has shown a tight range with minor pullbacks being quickly bought. This implies underlying buying interest and possibly a consolidation phase before a breakout.

Summary: The recent price volume development supports a cautiously bullish sentiment as the SPY remains firmly above key moving averages with increasing volume on upward movements.

QQQ (Nasdaq-100 ETF):
– Volume Trends: Similar to SPY, we see an uptick in volume, particularly in the last few sessions. This suggests increased trading activity which is often a precursor to significant price moves.
– Moving Averages: QQQ’S price action remains comfortably above its 50-period moving average, indicating a stronger bullish undertone compared to SPY.
– Notable Price Movements: The price behavior mirrors a consolidation with a slight upward bias, suggesting potential for a breakout.

Summary: The market sentiment for QQQ is relatively bullish given the sustained price above moving averages and recent volume surges. This indicates a likelihood of continued upward momentum.

VXX (Volatility Index):
– Significant Spikes: The past sessions reveal a lack of significant spikes in VXX, indicating low volatility and a relatively calm market. This usually corresponds with a bullish sentiment in the broader markets (SPY and QQQ).

Summary: The steady decline or low spikes in VXX indicates a stable, low-volatility environment, which is conducive to continued bullish sentiment in SPY and QQQ.

Sector Analysis

Based on sector ETFs performance over the past 30 days:
– Strong Sectors:
– XLK (Technology): Consistently strong with rising prices and considerable volume, reflecting investor confidence and positive momentum.
– XLY (Consumer Discretionary): Showing robust price action and increasing volume, indicating healthy sector rotation towards consumer stocks.
– XLC (Communication Services): Demonstrating stability and upward movement, albeit less aggressive than XLK and XLY.

Weak Sectors:
- XLE (Energy): Experiencing sideways movement and relatively lower volume, suggesting lack of strong investor interest.
- XLU (Utilities) & XLP (Consumer Staples): Both sectors have displayed lower volatility and subdued performance, indicating market rotation away from defensive sectors.

Key Levels to Watch

SPY:
– Support Levels: Immediate support near $549, followed by more robust support around $545.
– Resistance Levels: Near-term resistance is around $552, with a critical resistance level at $555 that could trigger a breakout if surpassed.

QQQ:
– Support Levels: Key support at $469, with a deeper support level around $466.
– Resistance Levels: Resistance lies at $472, with a notable level at $474 that could see an acceleration in buying if broken.

Scenarios

Bullish Scenario:
– SPY and QQQ: If both ETFs break above their respective resistance levels ($552 for SPY and $472 for QQQ), fueled by positive economic data or strong earnings reports, we could see a solid bullish rally. Participation by technology and consumer discretionary sectors could add further momentum.

Bearish Scenario:
– SPY and QQQ: A break below their support levels ($549 for SPY and $469 for QQQ), potentially triggered by negative economic news or geopolitical tensions, could lead to a rapid market downturn. A rise in VXX could accompany increased selling pressure.

Overall Commentary

The current market environment exhibits a cautiously bullish sentiment characterized by consolidation phases with underlying buying interest. Technology and consumer discretionary sectors are particularly strong, hinting at risk-on behavior by investors. Defensive sectors like Utilities and Consumer Staples are comparatively weak, signaling sector rotation. Key levels in SPY and QQQ will be crucial to monitor in the coming days to gauge the market’s next move. Volatility remains low, favoring upward momentum barring any significant market disruptors.