Market Analysis

SPY|QQQ Wednesday 8AM 6/05/2024

June 5, 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 a generally upward trend with some volatility. Focusing on the recent 13 bars:
– Volume Trends: Recent volumes appear somewhat elevated, indicating active trading sessions, especially in the last three bars.
– Moving Averages: The 50-period moving average has been trending upwards, which typically suggests bullish sentiment.
– Notable Price Movements: SPY has been consolidating around the 530 level with a slight bias towards higher highs and higher lows. This pattern indicates accumulation and a potential breakout scenario.

QQQ (Nasdaq-100 ETF):
For QQQ, the 30-minute chart displays a upward trend similar to SPY but with more pronounced volatility:
– Volume Trends: QQQ’s recent 13 bars show fluctuating volumes, generally higher than the earlier part of the timeframe.
– Moving Averages: The 50-period moving average is rising, indicating momentum.
– Notable Price Movements: The QQQ is testing the resistance around the 457 level, which is critical. A breakout above this could trigger further gains.

VXX (Volatility Index):
The VXX chart suggests decreasing volatility in recent times:
– Significant Spikes/Drops: No significant spikes; instead, there’s a drop in the last few segments.
– Impact on SPY and QQQ: Lower VXX often correlates with bullish sentiment for SPY and QQQ as reduced volatility implies increased investor confidence.

Sector Analysis:

A review of sector ETFs performance over the past 30 days reveals the following:
– Strong Sectors:
– XLK (Technology): Exhibit strong performance, aligning with the QQQ movement.
– XLY (Consumer Discretionary): Demonstrating robust gains.
– XLC (Communication Services): Recently seen strength in the last week.
– Weak Sectors:
– XLRE (Real Estate) and XLU (Utilities): More of a defensive sector; underperforming suggesting a risk-on environment.
– Sector Rotation: Investing seems to be moving from defensive sectors like XLU and XLRE to more growth-oriented areas like XLK and XLY.

Key Levels to Watch:

SPY:
– Support Levels: 525 (near-term), 520 (psychological support).
– Resistance Levels: 530 (immediate resistance), 535 (strong overhead resistance).

QQQ:
– Support Levels: 453 (near-term), 450 (psychological support).
– Resistance Levels: 457 (immediate resistance), 460 (potential breakout level).

Scenarios:

Bullish Scenario:
– Positive economic data and strong earnings reports could be catalyzing factors.
– SPY and QQQ breaking above the key resistance levels (530 for SPY and 457 for QQQ), with increasing volume confirming the breakout.
– Sector rotation into growth and tech suggests sustained buying interest in these areas.

Bearish Scenario:
– Negative economic news or external geopolitical tensions could pressure indices.
– A failure to hold critical support levels (525 for SPY and 453 for QQQ) could lead to increased selling pressure.
– Elevated VXX indicating rising fear could further contribute to a bearish sentiment.

Overall Commentary:

The market is currently showing a favorable bullish trend with upward movements in major indices like SPY and QQQ. The overall sentiment remains positive, bolstered by sector rotation into technology and consumer discretionary, which often leads bullish movements. Volatility is low, as suggested by VXX, indicating market confidence. However, investors should remain cautious of potential downside risks from economic data or geopolitical events. Important resistance levels are close; a positive breakout could extend the rally, while failure could lead to consolidation or pullbacks.