Macro Week in Review/Preview June 29, 2012

Last week’s review of the macro market indicators saw heading into the last week of the second Quarter looked for Gold and Crude Oil to continue lower. The US Dollar Index was poised to move higher with US Treasuries continuing to consolidate with a slight downside bias in the short term. The Shanghai Composite looked headed lower while Emerging Markets continued the bear flag in the broad consolidation. Volatility looked to remain low keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. The view on Crude Oil contradicted this as Oil and Equities have been correlated, and a move higher by the US Dollar Index or especially Treasuries would likely bring Equities lower. Despite this the charts for the SPY, IWM and QQQ all showed a short term upside bias within consolidation on the weekly view.

The week played out with Gold falling to support while Crude Oil ran along the bottom of the lower range before both launched higher Friday. The US Dollar continued higher while Treasuries continued the consolidation, before both were knocked back Friday. The Shanghai Composite worked lower while Emerging Markets broke the bear flag lower before rebounding Friday. Volatility bounced higher before also dropping back to end the week. Th mixed signals played out in the Equity Index ETF’s as they moved sideways drifting lower until a major Friday rally led by the IWM. 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 ended the week by breaking out of a basing between 1550 and 1570, moving higher Friday to the confluence of the 20 and 50 day Simple Moving Averages (SMA). The Relative Strength Index (RSI) on the daily chart moved back to the mid line on the way to turning bullish with a Moving Average Convergence Divergence (MACD) indicator that is improving towards a positive cross on the daily chart. The weekly chart shows the consolidation in the top half of the descending channel continues after another touch at the rising 100 week SMA. The RSI on this timeframe continues to slowly trend lower with a MACD that is negative but improving. The round number 1600 is above and there is resistance above that at 1620 and 1640. A move over 1640 and then out of the channel would signal a turn higher and a first target of 1700. Support below continues at 1570 and 1550 and a move under that targets 1485. Consolidation in a Descending Channel.

West Texas Intermediate Crude Daily, $CL_F

West Texas Intermediate Crude Weekly, $CL_F

Crude Oil ended the week by breaking out of a basing between 77 and 81, moving higher Friday thru the 50 day SMA on a massive 8% move. That move took the RSI right to the mid line on the daily chart continuing the run toward bullish territory, with a MACD that shot higher as well. The weekly chart shows a potential Tweezers Bottom on the 38.2% Fibonacci at 76.99. The RSI on this timeframe is moving higher off of the technically oversold level and the MACD is negative but slowly improving. Not bullish yet but back at the top of the consolidation. Resistance higher is found at 88 and then 93. Support lower here at 84 then 81 and 77 lower. Short Term Bullish within Intermediate Consolidation with an Upside Bias.

US Dollar Index Daily, $DX_F

US Dollar Index Weekly, $DX_F

The US Dollar Index consolidated within the 81.60-82.60 range, between the neckline of the Inverse Head and Shoulders on the daily chart and the 61.8% Fibonacci level on the weekly chart. The RSI on the daily chart remains bullish but is running lower and near a turn to bearish with a MACD that is moving negative, away from a positive cross. On the weekly view the RSI looks similar, in bullish territory but heading lower. The MACD on the weekly is positive but fading back to zero. looks like a pullback in the cards. Support lower is found at 81.20 and 80.70 followed by 80.28 and 80. Resistance is above at 82.60 and 83.20. Above that the uptrend continues. Pullback within the Uptrend.

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

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

US Treasuries, as measured by the ETF $TLT, continued the latest round of consolidation between 125 and 127.50. The RSI on the daily chart continues the slow trend lower in bullish territory with the MACD negative but holding steady. On the weekly chart the bull flag continues with a RSI that is leveling in strong bullish territory and a MACD that is positive but fading. There is support below 125 and 124 and 122 followed by 118.67. Under 122 the uptrend is in doubt. Resistance is found over 127.50 at 130.36 and then a Measured Move to 150 comes into play. Consolidation within Uptrend.

Shanghai Stock Exchange Composite Daily, $SSEC

Shanghai Stock Exchange Composite Weekly, $SSEC

The Shanghai Composite continued its run lower and moved into a consolidation phase under the 2230 resistance level. The Bullish Engulfing candle Friday may signal a bounce higher if confirmed Monday. The RSI on the daily basis bounced off of the technically oversold level with a MACD that is negative but improving. The weekly view shows the trend lower with a RSI that is trending lower and a MACD that is negative. There is support lower at 2150 and a target from the symmetrical triangle breakdown at 1900 followed by support at 1750. Resistance above 2230 is found at 2320 and 2380. Downtrend Continues with a Chance of Consolidation.

iShares MSCI Emerging Markets Index Daily, $EEM

iShares MSCI Emerging Markets Index Weekly, $EEM

Emerging Markets, as measured by the ETF $EEM, gapped higher back into the prior rising channel on strong volume. The RSI on the daily chart leapt back higher near bullish territory, but not quite, with a MACD that is growing more positive again, averting a negative cross. On the weekly chart the expanding wedge is still intact despite a long white candle over the 200 SMA. The RSI continues to rise on this timeframe and is nearing the mid line with a MACD that is heading towards a positive cross. Uncertain on this timeframe. There is resistance higher at 40 and 42.54, with a move over 40 signaling a reversal. Support lower comes at 35.91 ad 34.50. Consolidation within the Downtrend.

VIX Daily, $VIX

VIX Weekly, $VIX

The Volatility Index moved higher but found resistance at the 21.25 level and fell back. The RSI continuing back lower with a MACD that is improving towards a positive cross on the daily chart. Moving out to the weekly the RSI is also running lower with a MACD that is about to cross negative, diverging. There is support lower at 15.67 and 14 with resistance higher at 21.25, 24 and 28. Continued Low Volatility.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY started the week gapping lower and consolidating at support only to gap back higher Friday breaking the most recent high and settling back over the 100 SMA. The RSI on the daily chart is rising and about to move into bullish territory with a MACD that is positive and growing. All positive. The weekly view shows a strong white candle negating the Evening Star doji from last week and over the 2011 highs. The RSI on this timeframe is continuing to rise towards bullish territory with a MACD that is improving towards a positive cross. The Momentum shows higher. Resistance is found at 138.95 and 141 followed by the previous high and then a renewed major bullish push higher. Support lower is found at 134.12 and 131.46 followed by 128 and 126.50. Under that it gets ugly. Short Term Upside Bias with Chance of Consolidation.

IWM Daily, $IWM

IWM Weekly, $IWM

The IWM started the week moving lower and consolidating at long term support only to gap higher Friday breaking the most recent high and settling back over long term support/resistance at 79.10. The RSI on the daily chart is rising and moved into bullish territory, making a new higher high with a MACD that is positive and growing. All positive. The weekly view shows a strong white candle negating the Evening Star from last week stalling at a retrace of the 2007 highs. The RSI on this timeframe is continuing to rise towards bullish territory with a MACD that is improving and about to cross positive. The Momentum shows higher here as well. Resistance is found at 80 and 81.57 followed by 82, 84 and then a renewed major bullish push higher. Support lower is found at 76.65 and 74.60 followed by 73. Under that it gets ugly. Short Term Upside.

QQQ Daily, $QQQ

QQQ Weekly, $QQQ

The QQQ started the week moving lower and consolidating at support only to launch back higher Friday off of a Hammer Thursday. The RSI on the daily chart is rising and about to move into bullish territory with a MACD that is positive and growing. All positive but the weakest of the three Indexes on this timeframe. The weekly view shows a positive candle negating the Evening Star from last week but still short of the recent June highs, and looking like consolidation. The RSI on this timeframe is moving higher with a MACD that is improving towards a positive cross. The Momentum shows higher. Resistance is found at 64.50 and 65.70 followed by 67.10 and the previous high and a renewed major bullish push higher. Support lower is found at 61.67 and 60 followed by 59.40. Short Term Consolidation with an Upside Bias.

Heading into the back half of the year we start with a holiday shortened week and a market with some upside momentum. Crude Oil looks to continue the move higher while Gold may consolidate the gains within a down channel. The US Dollar Index looks to continue its pullback in the uptrend with Treasuries continuing to consolidate with an upside bias. The Shanghai Composite may take a breather in its downtrend while Emerging Markets consolidate in their downtrend, determining if they want to reverse it. Volatility looks in control and the combination creates an environment where the Equity Index ETF’s are biased higher. A reversal by the US Dollar Index or a move higher by Treasuries will likely negate this. The charts of the Equity Indexes generally agree and point higher with the IWM the strong est followed by the SPY and then the QQQ. Use this information as you prepare for the coming week and trade’m well.

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