Market Analysis

SPY|QQQ Wednesday 4PM 8/21/2024

August 21, 2024 4 min read

Market Sentiment Analysis:

Overall Market Sentiment:

SPY (S&P 500 ETF):
Analyzing the 30-minute intraday chart for the past 30 days of SPY, the short-term momentum and market sentiment indicated by the recent 13 bars highlight a somewhat mixed yet slightly bullish trend.

Volume Trends: Over the recent 13 bars, volume has shown some peaks during downward movements, particularly around the 15:00 bar indicating a buying action or short-covering around support levels.
Moving Averages: Based on the short-term moving averages, SPY has maintained a close alignment, indicating consolidation. The 10-period moving average is slightly above the 20-period moving average, suggesting minor bullish sentiment.
Notable Price Movements: The price has been relatively stable moving with slight fluctuations between 560.75 and 561.25 without significant gaps. Resistance seems to be forming around 561 levels based on recent price rejections.

QQQ (Nasdaq-100 ETF):
For QQQ, the analysis reveals slightly stronger momentum compared to SPY with an inclination towards still bullish sentiment:

Volume Trends: Volume trends are consistent with increased trading activity in late sessions and slight increases during price appreciations.
Moving Averages: QQQ’s recent 13 bars have shown prices maintaining above the moving averages, suggesting a stronger buy-side interest. The 10-period moving average is above the 20-period, emphasizing the bullish bias.
Notable Price Movements: Recent bars show higher highs and higher lows with some support around the 482 levels. This points towards buyers stepping in at higher levels.

VXX (Volatility Index):
Examining VXX can help gauge market sentiment volatility:

The VXX data indicates a decline with notable drops at the end of the observed period. This decline shows reduced market fear; hence, there’s a sentiment of stability or complacency among investors.
The trend in VXX also suggests diminishing hedging activity, often preceding short-term market consolidations or modest upward movements for SPY and QQQ.

Sector Analysis:

Strong Sectors:
Reviewing sector ETF performances over the past 30 days and recent activity, some sectors exhibit strong movement:

XLY (Consumer Discretionary): It has shown a near-constant increase in price, indicating consumer confidence.
XLK (Technology): Holding strong with minor fluctuations, pointing towards investor confidence in tech stocks.
XLE (Energy): Has shown resilience, possibly due to recent moves in commodities.

Sector Rotation:
– Weaker Sectors: Include XLU (Utilities) and XLP (Consumer Staples), witnessed more sideways movement suggesting less investor interest currently.
– Implications: Investors are shifting from defensive to cyclical and growth-oriented sectors, a positive sign for general market health.

Key Levels to Watch:

SPY:
– Support Levels: Key support is around 559.75 where price bounced and high volumes were observed.
– Resistance Levels: Strong resistance is seen near 561.75 which, if broken, could lead to further bullish momentum.

QQQ:
– Support Levels: The price sees key support at 481.00 significant due to prior consolidations.
– Resistance Levels: Resistance around 483.50, breaking this could pave the way for a bullish breakout.

Scenarios:

Bullish Scenario:
For SPY and QQQ, a potential bullish scenario could be driven by:
– Positive economic data or earnings releases.
– Breakouts above critical resistance levels of 561.75 for SPY and 483.50 for QQQ.
– Continued sector strength in Technology and Consumer Discretionary sectors propelling indexes higher.

Bearish Scenario:
Potential bearish scenario for SPY and QQQ may involve:
– Negative economic news or unexpected geopolitical tensions.
– Breaching key support levels (below 559.75 for SPY and 481.00 for QQQ).
– Increased VXX signalling heightened market fear, causing pullbacks or sell-offs.

Overall Commentary:

The current market environment suggests cautious optimism. While key sectors like Technology and Consumer Discretionary show strength, consistent market-wide support is critical for sustained upward momentum. The recent level of VXX indicates lower immediate volatility concerns, aligning with potential upward movement. However, traders should keep a keen eye on support levels and any macroeconomic developments that could shift momentum.