Macro Week in Review/Preview March 25, 2012

Last week’s review of the macro market indicators saw heading into next week the market providing some clarity. Gold looked to continue lower while Crude Oil consolidated with an upward bias. The US Dollar Index looked better to the upside but Treasuries now were solidly biased lower. The Shanghai Composite looked lower while Emerging Markets were poised to break higher out of a consolidation zone. The Volatility Index added some spice to the party and did not look to move markedly higher soon. These influencers built a backdrop for the US Equity Index ETF’s SPY, IWM and QQQ to continue higher. An acceleration of Treasuries lower would only reinforce this. The charts of those Index ETF’s agreed with the SPY and QQQ looking the strongest and the IWM still working off some previous price history.

The week saw Gold and Oil both consolidate, with Gold testing lower before recovering. The US Dollar only drifted higher while Treasuries found support and bounced a bit. The Shanghai Composite did fall lower but held support while Emerging Markets fell to the bottom of their recent range. Volatility continued to hover at the lows. The Equity Index ETF’s finally pulled back on their runs higher with the QQQ holding out the longest. What does this mean for the coming week? Lets look at some charts.

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Gold Daily, $GC_F

Gold Weekly, $GC_F

Gold held its ground, consolidating for the week in a bear flag. The daily chart shows the Relative strength Index (RSI) holding the move back over 40 but not strong yet with a Moving Average Convergence Divergence (MACD) indicator improving toward the zero line. Positive signs within the downturn, but still below all of the Simple Moving Averages (SMA). The weekly chart shows the continued move lower within the downward channel, but a doji print for the week on the 50 week SMA, a potential reversal if confirmed. The RSI on this time frame is bullish but trending lower while the MACD has turned negative and is growing, adding fuel to the downside. There is support lower at 1620 and 1570 while any bounce has resistance at 1675 and then 1700 and 1728. Consolidation in intermediate Term Downtrend in Long Term Uptrend.

West Texas Intermediate Crude Daily, $CL_F

West Texas Intermediate Crude Weekly, $CL_F

Crude Oil continued the consolidation within the range between 104.81 and 110. The daily chart shows a RSI that continues to hold challenges at the 50 level and return higher, while the MACD is hovering in negative territory but stalled. It remains over all but the 20 day SMA on this time frame, bullish. The weekly view shows consolidation in a bull flag over the 103.81 Fibonacci level. The RSI is bullish and holding while the MACD is positive and holding. There is support at 104.81 with 102.50 and 93 below that. Resistance higher over 110 comes at 113.50 and then 121.29. The trend is higher. Consolidation With an Upward Bias.

US Dollar Index Daily, $DX_F

US Dollar Index Weekly, $DX_F

The US Dollar Index consolidated lower within the triumvirate of the 20, 50 and 100 day SMA. The RSI on the daily chart is now bullish but trending lower while the MACD is crossed negative, a downside bias from this time frame. The weekly chart also shows lower. The Shooting Star from last week was confirmed lower with a RSI that is falling again after a failed retest of the uptrend line and a MACD that is negative and growing more so again. There is support lower at 79 and 78.40 before 78. resistance on a bounce higher is found at 80.30 and 80.80 before 81.50. All the moving parts may just continue it sideways. Short Term Downside within the Intermediate Uptrend.

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, found support at the rising 200 day SMA and bounced higher. On the daily the RSI also turned and is closing in on 50 gain while the MACD is improving and about to cross positive. The weekly chart is much more negative. The RSI continues to trend lower despite the bounce this week and the MACD continues to grow more negative. The Hammer candle, out of the lower Bollinger band, may signal a reversal, at least in the short term. Support lower comes at 109.50 and 104.50, while the re3cent bounce sees resistance at 112.50 and 115 followed by 118.67. A move over 115 will move the bias to neutral. Short Term Bounce within a Downtrend.

Shanghai Stock Exchange Composite Daily, $SSEC

Shanghai Stock Exchange Composite Weekly, $SSEC

The Shanghai Composite looks very ugly again on a short term basis. the daily chart is trending lower with a RSI that is also trending lower and a MACD that is growing more negative. It is now below the 20, 50, 100 and 200 day SMA. On the weekly view the downward trend continues after topping at the symmetry line, but held at the 20 week SMA. The RSI on this time frame made a new high but is trending lower after printing a new high, but not in bullish territory. The MACD is fading again. Support comes lower at 2320 and then 2230 and 2168. Resistance on a bounce is found at 2450 and 2610. Continued Downside.

iShares MSCI Emerging Markets Index Daily, $EEM

iShares MSCI Emerging Markets Index Weekly, $EEM

Emerging Markets, as measured by the ETF $EEM, is holding support over the 42.54 level that was the important breakout from January. The daily chart shows a RSI struggling but holding bullish while the MACD grew more negative. On the weekly chart the bull flag continues over the 42.54 support with a long fall lower to support at 35.91. The RSI is continuing lower after a turn down and the MACD continues to fade, adding weight to at least a test of support. Resistance on a bounce is found at 44.27 and 45 before 48.20. Consolidation with a Downside Bias.

VIX Daily, $VIX

VIX Weekly, $VIX

The Volatility Index continues to hold lower with no signs of turning up. The daily chart shows the bear flag with a RSI that is trending lower and bearish and a MACD that is approaching a cross positive, but from a very shallow angle. All of the SMA are falling also. The weekly chart shows a second week holding under resistance at 15.67 with a RSI that is trending lower and a MACD that is very slowly improving. Support lower comes at 12.40 and 10, while a bounce finds resistance at 15.67 followed by 18 and 21.25. None of these upside levels appear to be in the near term future. Continued Flat to Downside.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY finally pulled back within the long run higher and held just above the 20 day SMA. The RSI on the daily basis is turning higher after holding bullish while the MACD is about to cross negative. With the SMA all sloping higher there is no confusion about the trend being higher. The weekly chart shows bullish as well but with a RSI that kinked lower at the 70 level and a MACD that is slowly fading, a continued pullback is possible. The week held over the Fan Line and shows it nearing the 100% retracement of the move lower from 2007 to 2009. There is support lower at 137.50 and 136 followed by 134. Resistance on a bounce comes at 141.07 before the 2007 top and then a target of 161.97. Consolidation or Slight Pullback within Up Trend.

IWM Daily, $IWM

IWM Weekly, $IWM

The IWM tested higher but fell back within the previous 81.57 to 83.75 range. The daily chart shows a RSI that bounced and has remained bullish while the MACD is refusing to give the positive territory. It also sits above all the rising SMA. The weekly chart shows a bull flag, but with a doji print for the week, signaling indecision. The RSI is bullish and continuing to trend slowly higher while the MACD is positive but fading. Resistance comes above the channel at 85.80 and below it at 80. Consolidation with an Upside Bias.

QQQ Daily, $QQQ

QQQ Weekly, $QQQ

The QQQ printed a new high with a shooting star doji Wednesday and has consolidated since. The daily chart shows a RSI that is technically overbought at 74 but level to falling and a MACD that is fading and about to cross negative. These suggest downside. The SMA are all sloping higher though showing the trend. The weekly chart shows it came within a hair of the target from the Diamond patter at 69 printing a doji. The RSI on this time frame is just braking 70, technically overbought but not any where near extreme while the MACD is positive, strong, and slowly growing. Support lower comes at 65.30 and 62.75. the target above 69 is the 71.46 Fibonacci level. Consolidation with Chance of Pullback within Uptrend.

As the last week of the first quarter of 2012 comes around beware of window dressing buying potential in hot names. As for Gold it looks back to its old confusion, looking sideways in the intermediate term downtrend in the long term uptrend while Crude Oil consolidates in the 104.81-110 range with a bias higher. Both the US Dollar Index and US Treasuries are biased to the downside in the intermediate term but Treasuries may continue to rally short term. The Shanghai Composite looks to continue lower while Emerging Markets are at support and losing that will follow lower. The Volatility Index still has a harder road to move in the bias direction lower but shows no signs of rising anytime soon. These influencers create a backdrop for the US Equity Index ETF’s SPY, IWM and QQQ to continue to consolidate with in their bullish trends. Their charts tend to agree but this week the SPY and QQQ show signs that the pullback may continue. Use this information as you prepare for the coming week and trade’m well.

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