Macro Week in Review/Preview December 24, 2011

Last week’s review of the macro market indicators looked with the last two weeks of the year upon us and the Holidays lighter volume and less interest. Moves can get exaggerated in this environment. Gold still looked broken from its move and poised for more downside while Crude Oil was also broken and biased lower. US Treasuries and the US Dollar looked to continue to drive the direction of the markets crushing Equities as they move higher. The Shanghai Composite, which has been playing a supporting role in moving Equities lower, looks to continue to do so long term but might consolidate the last leg down in the short run first. Emerging Markets looked to pay the price lower as well. Volatility was poised to continue to drift lower supporting an orderly move. All this set up for the Equity Index ETF’s, SPY, IWM and QQQ, to move lower in the coming week, and the short term charts agree. Use this information as you prepare for the coming week and trade’m well.

Gold hung tough consolidating the move lower while Crude Oil found a bottom and started higher. The US Dollar Index consolidated its move in a bull flag while Treasuries jumped Monday but met resistance and trailed lower the rest of the week. The Shanghai Composite did consolidate sideways while Emerging Markets found a bottom Monday and have moved higher. Volatility drifted lower as anticipated. The combination of a consolidating US Dollar, falling Treasuries and lower Volatility allowed the Equity Index ETF’s SPY, IWM and QQQ to find support and move higher, with the SPY having the strongest move followed by the IWM and the QQQ bringing up the rear. How does this impact the view for the week ahead? Let’s look at some charts.

If you like what you see sign up for more ideas and deeper analysis using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits feed and on chartly.

Gold Daily, $GC_F

Gold Weekly, $GC_F

Gold continued its bear flag this week printing a Shooting Star Wednesday that was confirmed lower Thursday and Friday. It also touched but failed to close back above the 200 day Simple Moving Average (SMA). The Relative Strength Index (RSI) on the daily chart remains bearish and is rolling lower while the Moving Average Convergence Divergence (MACD) indicator is slowing its approach toward the zero line from below. The SMA’s on the daily chart are all very flat and starting to roll lower with the 20 day going first. On the weekly chart price continues to hold over the 50 week SMA with a Doji, signaling indecision, remaining below the rising 3 year price channel. The SMA are all sloping upward reminding that the longer term trend remains higher, but the RSI is trending lower and near turning bearish while the MACD which has been negative turned more so this week. The tide is turning. There is support lower at 1600 and 1575 before the channel between 1550-1558 and 1485. Resistance on a bounce comes at 1620 followed by 1638-1645 and 1665. It may continue to consolidate this week but the bias is now lower. Consolidation to Lower.

West Texas Intermediate Crude Daily, $CL_F

West Texas Intermediate Crude Weekly, $CL_F

Crude Oil rose off of support at 93 and ran higher on the week. It ended the week near resistance at 100 and is showing signs of consolidation or a pullback with shorter candle bodies and upper shadows. The RSI on the daily chart is at the falling resistance level as well, but still bullish while the MACD is back to the zero line but the Exponential Moving Average’s (EMA) of the indicator look like they may glance off and not cross. A true triple sing of resistance on this timeframe. On the weekly chart the picture is a bit more bullish, with the RSI moving higher again off a touch of the mid line and the MACD positive although fading. It printed an inside candle for the week moving off the rising trend support nearly retracing the entire move from last week, but unable to make a new high. Resistance over 100 comes at 102.5 and 104.82 before it can run to 113.50 again. Support lower is at 97 followed by 95 and then below 93 at 90 and 88.50. The uptrend from October remains in tact until it breaks 90. Look for some consolidation at the 100 level before any further upside. Consolidation to Higher.

US Dollar Index Daily, $DX_F

US Dollar Index Weekly, $DX_F

The US Dollar Index continued in a bull flag for the week touching support at the 20 day SMA, and holding over the highs near 79.70 from October and November. The daily chart shows the RSI is falling off from the 70 level and pointing lower while the MACD is crossing bearishly negative. The weekly chart shows the true trend is higher and the stall at the 50% retracement level of the move higher from 2008 into 2009. This level has been a consolidation area previously as well. The RSI on the weekly chart which continues to trend higher, and the MACD slowly increasing support the trend continuing. Resistance comes higher at 81.10 followed by 82 and 83.10. Support lower at 78.90 followed by 78.10 and 77.00. Continued Upside.

iShares Barclays 20+ Yr Treasury Bond Fund Daily, $TLT

iShares Barclays 20+ Yr Treasury Bond Fund Weekly, $TLT

Treasuries, as measured by the ETF $TLT, broke out of a symmetrical triangle higher to a new higher high before falling back into the triangle and ending the week holding support at the bottom rail and 50 day SMA. The outlook on the daily timeframe looks ugly. Despite the Hammer candle printed, a potential reversal signal, the RSI is continuing lower through the mid line and the MACD is crossed negative, both supporting further downside. The weekly chart shows some confusion over the last 6 weeks. The first 5 created a Rising Three Methods bullish pattern, but then this week printed a potential reversal pattern, a Dark Cloud Cover. What can be definitively said is that it is in a bull flag after the run up from 95 and is finding resistance at the top of the flag at 122.50. The RSI on this timeframe shows it bullish and holding over 60 but pointing lower. The MACD is also flirting with a bearish negative cross. Support comes lower at 115 and then 112.50 and 110, with a move below 115 turning this bearish in the short run. Resistance higher comes at 118.67 and the top of the flag. A move over the flag has a target on a Measured Move (MM) to 134. Until the 115 or 122.50 levels are broken look for more broad range consolidation. Further Consolidation in the Flag.

Shanghai Stock Exchange Composite Daily, $SSEC

Shanghai Stock Exchange Composite Weekly, $SSEC

The Shanghai Composite consolidated its losses around the support area at 2200 this week. On the daily chart the RSI is still very bearish and hugging the 30 level while the MACD is negative but improving slowly toward the zero level. Perhaps a change of direction but more likely further consolidation. All of the SMA on both the daily and weekly time frame continue to slope lower and are all above price re-enforcing the downtrend. The RSI on the weekly chart continues to trend lower while the MACD remains flat, giving no direction. The weekly chart printed a Doji candle, signaling indecision, adding weight to the stall in the down move. There is support below 2200 at 2060 and then at 1820, while resistance higher comes at 2320 and then 2357. It wold take a move over 2320 to even consider the downtrend over. Consolidation to Lower.

iShares MSCI Emerging Markets Index Daily, $EEM

iShares MSCI Emerging Markets Index Weekly, $EEM

Emerging Markets, as measured by the ETF $EEM, started the week with a Bullish Kicker and continued higher. It has positive support on the daily chart for a continued move higher from the RSI trending up through the mid line and the MACD crossing positive. The shorter 20 and 50 day SMA’s are also turning. The weekly chart printed a bullish engulfing candle back over the 200 week SMA and holding support at over 35.91. The RSI continues to find resistance at the mid line though and remains bearish while the MACD is running flat offering no guidance. The trend remains lower though as shown by the ‘trendline resistance’ on each chart, the 100 day SMA and the 20 week SMA, guiding it lower. It must break resistance higher at 39 to start to think about changing that and then resistance is found higher at 40.75 and 42.54. Support lower is at 35.91 and then 33.16 on a break there. Short Term Uptrend in Long Term Downtrend.

VIX Daily, $VIX

VIX Weekly, $VIX

The Volatility Index continued to move lower during the week ending at 5 month lows. The RSI on the daily chart continues to trend lower and is just getting to the 30 level while the MACD is negative and continuing to move sideways. Both support a further move lower. The weekly chart printed a long red candle ending near the lows suggesting more downside. The RSI on this timeframe is only on the verge of turning bearish while the MACD grows more negative. There is support lower at 18 and then 15.36-15.67. Resistance on a bounce higher comes at 21.25 followed by 24 and 28 before a retest of the summer channel at 30. Continued Downside.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY started the week with a Bullish Kicker pattern and continued higher through the rest of the week, peeking above the downtrend resistance. Friday’s candle with virtually no upper shadow was a strong end to the week, but is clouded a bit by the falling volume on the rise, and yes I know it was a Holiday week. The RSI agrees with price, rising and bullish as does the MACD that is growing more positive. The weekly chart shows the move higher off of the touch of the Fibonacci Arc, ending above all of the SMA on both timeframes. The RSI on the weekly chart continues to run just under a move to bullish though while the MACD is positive and moving sideways. Thus far a move higher within the broad consolidation range. But the cross of the downtrend resistance makes you pay notice. Resistance comes higher at 128.00 and a move above that turning the neutral intermediate term trend bullish with resistance at 131.10 and 135.80. Support lower comes at 124.50 followed by 120. A move below 120 would move that trend to bearish in the intermediate with support lower at 118.50 and 115.50. Short Term Higher in a Broad Range.

IWM Daily, $IWM

IWM Weekly, $IWM

The IWM started the week reversing a strong down candle and continued higher through the rest of the week, consolidating above the downtrend resistance. Volume also tailed as it moved higher. The RSI on the daily chart has held the mid line trying to turn bullish as the MACD crossed positive. The weekly chart shows the move higher remaining within the upper end of the consolidation range, mixed within the SMA on both timeframes. The RSI on the weekly chart continues to run under a move to bullish while the MACD is positive and moving sideways. Thus far a move higher within the broad consolidation range. But the cross of the downtrend resistance makes you pay notice here too. Resistance comes higher at 74.90 and then 76.65. A move above that turns the neutral intermediate term trend bullish with resistance at 80.49 and 86. Support lower comes at 71.60 followed by 70.60. A move below 70.10 would move that trend to bearish in the intermediate with support lower at 67 and 63.70. Consolidation in a Broad Range.

QQQ Daily, $QQQ

QQQ Weekly, $QQQ

The QQQ started the week with a Bullish Kicker pattern but stalled ending the week well below downtrend resistance. Friday’s candle with virtually no upper shadow was a strong end to the week closing at the high, but is clouded a bit by that falling volume on the rise. The RSI held bullish and is moving higher while the MACD crossed positive, both supporting more upside in the short term. The weekly chart shows the move higher contained within last weeks price action but ending above all of the SMA on both timeframes except for the 50 day SMA on the daily chart. The RSI on the weekly chart continues to run sideways at the mid line from bearish territory while the MACD is flat and moving sideways. Neither giving any solid direction. Thus far a move higher within the broad consolidation range which is looking a lot like a year long Diamond Pattern stuck around the 100% retracement of the move lower during the financial crisis. This can resolve either higher or lower. Resistance comes higher at 57 and a move above that turning the neutral short term trend bullish with resistance at 58, 58.5 and 59.72. Support lower comes at 54.26 followed by 52.80. A move below 52.80 would move that trend to bearish in the intermediate with support lower at 50 and 47. Short Term Higher in a Broad Range.

The last week of the year begins with Gold consolidating but looking to move lower while Crude Oil may consolidate also but is biased to move higher. The US Dollar Index looks to continue higher while US Treasuries consolidate their loses above support. The Shanghai Composite looks to consolidate further within the downtrend while Emerging Markets ride a short term wave higher within their downtrend. Volatility is poised to continue lower. The influencers of the Equity Index ETF’s are mixed but biased to support Equities moving lower. This is in conflict with the short term view in the charts of SPY, IWM and QQQ which look higher within a a broad consolidation range, perhaps signaling a topping. The US Dollar Index joining Treasuries lower will help the rally in equities continue. But a reversal high in Treasuries, joining the Dollar Index, could turn that consolidation range into a move lower. The strongest of the Equity Indexes is the SPY followed by the IWM and the weakest the QQQ. Use this information as you prepare for the coming week and trade’m well.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus
Dragonfly Caps Blog