SPY Technical Analysis & Stock Market Update


Chart done on hourly timeframe. Markets are getting ready to close out a phenomenal July as all the S&P sectors are expected to end green for the month.  The first week of August focuses on the U.S. labor market and more key earnings from tech giants like Apple and Amazon, some of the most anticipated reports for the quarter. Stocks have had mixed responses to their reports this season, but most companies are meeting projections and more importantly, raising guidance. Markets want to see strong forward guidance to meet the valuations many stocks, especially tech, have gained in 2023. Last week’s reports also included Q2 GDP, which showed the U.S. economy grew at a rate of 2.4% compared to 2.0% in the first quarter. The GDP growth challenges the recession argument and sets the U.S. economy back in expansion mode. 

Apple and Amazon are both expected to beat earnings this week, but Amazon has a tougher battle. Revenue projections and profit projections were lowered by many analysts for Q2, which is part of the reason many companies came inline. Apple’s earnings expectations are far less than Q4 2022 and Q1 2023 so it is likely to surpass projections. Amazon on the other hand has much more aggressive projections, nearly doubling Q1 expectations likely due to Prime Day from earlier this quarter (Nasdaq.com). 

In terms of labor market reports, the biggest number in focus is July’s final reading of unemployment. About 97% of Americans have jobs, which is a historic number, but unemployment has ticked up slightly in recent months to 3.6%. The Fed’s series of interest rate hikes was expected to have an impact on the labor market, but so far it has stood resilient and job openings are still vast. If unemployment can remain at a historic low through the inflation battle and higher interest rates, then that would be a great result for our economy and our markets. 

Technical analysis:

Volatility increased to end the week last week as SPY sharply sold off on Thursday from its 2023 high down to a low of 451.55, where we’ve marked our critical support. Buyers need to defend that t avoid a sell-off down to 448.00-448.50. Our highest point of rejection last week was 459.55, which is also the yearly high. Buyers need a breakout above that point to regain full control and push to the next price target of 461.50-462.50.