Macro Month in Review/Preview February into March 2014

• Posted by Greg Harmon
• on March 2nd, 2014

Last month in this space my Monthly Macro Review/Preview had the monthly outlook heading into February suggesting the equity markets may see some consolidation or downside. Gold continued to be biased lower although it may consolidate as Copper continued to consolidate. Crude Oil looked to continue to drift higher and Natural Gas was also biased to the upside, and a bit stronger. US Treasuries looked to continue their bounce in the downtrend while the US Dollar Index drifted sideways. The Shanghai Composite looked weak in its downtrend and Emerging Markets looked to continue to move lower in their broad consolidation while the German DAX was ready for a pullback or consolidation. Volatility looked to remain low but drifting higher, lightening the breeze at the backs of US Equities. The Equity Index ETF’s SPY, IWM and QQQ looked ready for a rest at least and perhaps a pullback. How does an additional month impact the longer term picture? Let’s look at some charts.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

Metals

Gold, $GC_F

Gold bounced a bit in February but in the longer timescale it is still consolidating. The Relative Strength Index (RSI) took a turn higher and the MACD is flattening so this could turn into a real reversal but it has some time left to prove it. A move over the 20/50 month cross would be a good start. There is resistance at 1400 and then 1440 and 1550 above that. Support lower comes in at 1200 and below that resumes the downtrend. Continued Consolidation.

Copper, $HG_F

Copper put in another sideways month, with a very tight monthly range. The 3.00 to 3.40 range has held for almost a year now. The RSI is running flat at the mid line and the MACD is also flat, but may be working a positive cross through time. Price is starting to move outside of the bullish Andrew’s Pitchfork but is no where near a Hagopian Trigger. The Bollinger bands are continuing to slowly tighten as well. This consolidation could go on for some time still. Support lower is found at 3.00 and 2.85 before 2.50. Resistance higher is found at 3.40 and 3.80 before 4.00 and 4.50. Continued Consolidation.

Fuel

West Texas Intermediate Crude, $CL_F

Crude Oil is continuing to hold the support of the ascending triangle as it drifts toward the Lower Median Line of the bullish Pitchfork. The RSI is moving sideways, non-committal, as is the MACD. The rising trend support suggests an upward bias. There is resistance at 108 and 115 before the previous top at 140. Support lower is found at 92 and 84. Consolidation Continues with an Upward Bias.

Natural Gas, $NG_F

Natural Gas printed a very long upper shadow in February, signaling some indecision in the uptrend. This came as it tries to move over the prior resistance at 4.80. The RSI is rising and bullish and eh MACD is also rising as both support the upward path still. The rising volume on the push higher over the last few months is also positive. There is resistance at 4.80 and 5.40 followed by 6.00 and 8.65. Support lower comes at 4.40 and 3.80 followed by 3.40. Cautious Upward Bias.

Currency & Debt

US Dollar Index, $DX_F

The US Dollar Index continues to attempt to break down below the symmetrical triangle by moving sideways. This could morph into a sideways channel. The RSI is non-committal at the mid line with the MACD showing a slight downward slope. There is support lower at 79 and then 77 before 74.70 and 73. Resistance higher comes at 81.28 and 83.60 before 86.60. Continued Sideways Action with a Downward Bias.

US Treasuries, $TLT

US Treasuries, as measured by the ETF $TLT, followed their move higher in January with a slight advance, stalled by the 50 month SMA. The RSI is leveling under the mid line as it rebounds form a slight dip into bearish territory. The MACD is leveling and improving on the histogram. If both turn higher the reversal in bonds could become a reality. The price is on the verge of breaking the consolidation zone over 109.35 and above that there is resistance at 112 and 116 before 117.50 and 123.50. Support lower is found at 101.60 and below that resumes the death plunge. Consolidation Watching For A Range Break Higher.

Foreign Markets

Shanghai Stock Exchange Composite, $SSEC

The Shanghai Composite did nothing in February to dissuade investors that the downtrending channel is in charge. The RSI remains hovering under the mid line with s flat MACD in negative territory. There is resistance at 2260 and 2380 before 2450. Over that and bulls get noisy. Support comes at 1950 and then 1750 followed by 1680. Continued Downward Movement.

German DAX Composite, $DAX

The German DAX is showing signs it wants to break consolidation to the upside. That brings the Deep Crab Potential Reversal Zone (PRZ) at 11000 and the target from the ascending triangle break at 13800 back onto the plate. The RSI is strong near 70 and the MACD continues to rise. There is resistance at 9800 and then nothing. Support lower comes at 8150 and 7600. Continued Upward Price Action.

iShares MSCI Emerging Markets Index, $EEM

Emerging Markets, as measured by the ETF $EEM, bounced in February, a Piercing Line pattern, to remain over short term support. The RSI and MACD remain uninspiring though moving sideways. The price action has been in the bottom part of the consolidation range since August 2011 now and is showing no desire to leave it. Resistance higher comes at 42.54 and 44.50 followed by 50.55. Support lower is found at 37 and 35.25. Continued Sideways Action in the Lower Channel.

US Equity Markets

VIX, $VIX

The Volatility Index reversed the spike from January after briefly touching the long term 100 and 200 month SMA’s. The candle real body engulfed January’s and puts it back at the center of the broadening wedge. There is room to the downside at 12.40 and then 10 below. Resistance remains at 16.45 and 119 followed by 22. Continued Low Volatility.

SPY, $SPY

The SPY broke the consolidation to the upside, closing near the high in a bullish engulfing candle. The move continues to show price attracting to the Upper Median Line of the Andrew’s Pitchfork. There is the 127% extension of the previous down move at 189.12 just above and the 138.2% extension at 199.88 above that. The RSI is bullish and strong, just over 70 with a MACD that continues to rise. Both support more upward price action. There is no resistance higher and support comes lower at 175 and 169.25 before 158. Continued Upward Price Action.

IWM, $IWM

The IWM also printed a bullish engulfing candle closing at all-time highs. The move shows a possible push higher after a short consolidation following the completion of the AB=CD. The RSI is bullish and strong, just over 70 with a MACD that continues to rise. Both support more upward price action. There is no resistance higher but the price objective of the Inverse Head and Shoulders remains at 139.16 higher. Support comes lower at 110 and 98 before 87.50. Continued Upward Price Action.

QQQ, $QQQ

The QQQ also printed a bullish engulfing candle closing at 13 year highs. The move shows a possible push higher after a short consolidation and price is now at the midpoint between the Median Line and Upper Median Line of the Andrew’s Pitchfork. A continued move higher will attract it to the Upper Median Line. The RSI is bullish and strong, holding under 80 with a MACD that continues to rise. Both support more upward price action. There is resistance higher at 101.90. Support comes lower at 84 and 75.80 before 70.50. Continued Upward Price Action.

The monthly outlook heading into March suggests the equity markets have broke their consolidation to the upside and want more. Gold has committed to consolidation joining Copper. Crude Oil looks to continue to drift higher and Natural Gas is also biased to the upside, but with some caution now. US Treasuries look to continue their bounce in the recent consolidation while the US Dollar Index drifts sideways with a downward bias. The Shanghai Composite looks weak in its downtrend and Emerging Markets look to continue their broad consolidation in the lower part of a channel while the German DAX wants more upside. Volatility looks to remain low, helping US Equities. The Equity Index ETF’s SPY, IWM and QQQ look ready for a move higher following the short consolidation. Use this information to understand the long term trends in Equities and their influencers as you prepare for the coming months.

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