Macro Month in Review/Preview September into October 2014

special-sale

Last month in this space my Monthly Macro Review/Preview had the monthly outlook going into September looking bright for equities. Elsewhere it suggested that Gold and Copper might see more sideways action in September. US Treasuries looked to continue higher and the US Dollar Index was showing short term signs higher looking to join them. Crude Oil was at risk of losing support lower while Natural Gas looked to have bounced and staved off any further downside for a while. The Shanghai Composite was heating up in its consolidation with an upward bias and Emerging Markets looked to continue the move higher as the German DAX looked ready to rebound higher. Volatility was picking up but still looked to remain at low levels. With that backdrop, the Equity Index ETF’s SPY, IWM and QQQ were set up to continue higher in the coming months. The charts of the SPY and QQQ were showing they looked strong while the IWM continued to be in a range, but not giving up any ground. 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

Gold had yet another month of consolidation after the brief pullback, making the consolidation longer than the pullback. The long red Marubozu candle though suggests more downside, and with the price finishing near support at 1185 one wonders if the next leg down is about to begin. But the rising 100 month SMA is there near support with the lower Bollinger band below as the next levels to watch. The RSI remains in the bearish zone with the MACD avoiding a cross up this month, both supporting more downside. There is support at 1185 followed by 1070 and 975. Resistance higher now stands at 1300 and 1340 followed by 1420. Consolidation with a Downside Bias.

Copper, $HG_F
copper

Copper moved lower in the descending wedge during September. It ended the month on the lows with a peak below the triangle, suggesting a possible breakdown to come. That would target $1.50. The price remains in no mans land, outside of both the bullish and bearish Andrews’ Pitchforks, but not by enough to trigger a buy or sell signal. The RSI remains just above 40, where it would technically be called bullish but it has been in this area for nearly 3 years, so neutral. The MACD is level offering no guidance. There is support at 3.00 and 2.85 followed by 2.50 Resistance higher comes at 3.45 and 3.85. Consolidation with a Downward Bias.

Fuel

West Texas Intermediate Crude, $CL_F
oil

Crude Oil fell out of its triangle consolidation, continuing below the Lower Median Line of the bullish Pitchfork. The RSI dipped under the mid line and is testing 5 year lows as the MACD is turning down. There is support at 86 and 78 followed by 72. Resistance higher comes at 97 and 107.50. Consolidation with a Downward Bias.

Natural Gas, $NG_F
nat gas

Natural Gas held its ground, confirming the end of the brief downtrend, just before touching the rising trend. The RSI held at the mid line and is kinking higher with a MACD that is trying to avoid a cross down. The price action confirms a higher low to go with the higher high, trending higher. Resistance stands at 4.40 and 4.85 followed by 5.80. Support lower comes at 3.85 and 3.40 followed by 3.00. Uptrend Resumes.

Currency & Debt

US Dollar Index, $DX_F
usd

The US Dollar Index had a third consecutive move higher, completing a Three Advancing White Soldiers pattern. This is a bullish continuation pattern. The move takes it to 4 year highs and reverses the false break down from the symmetrical triangle to a break out to the upside. The RSI is strong, bullish and rising with a MACD that has just crossed up, both supporting more upward price action. There is resistance higher at 86.50 and 88.20 before 91.75 and 100. Support lower now stands at 83.50 and 81.25 followed by 79.25. Continued Upward Price Action.

US Treasuries, $TLT
tlt

US Treasuries, as measured by the ETF $TLT, printed an inside month, a Harami. It is stalling at the 50% retracement of the last leg lower. As it stalls the RSI is trending higher and the MACD is rising, supporting more upside. There is resistance at 119 and 123.40 followed by 130. Support lower comes at 114.15 and 110.50 followed by 107.9. and 101.60. Continued Upside.

Foreign Markets

Shanghai Stock Exchange Composite, $SSEC
ssec

The Shanghai Composite had a strong follow through month higher, printing a bullish Marubozu that ended over the 50 month SMA. It has not been above that since March 2010. The RSI is rising into the bullish zone with a MACD moving higher. The flat Bollinger band top is the only piece of negative news. If it can turn that higher then there is a lot of upside room. Resistance comes higher at 2400 to 2440 and then 2640 and 3000. Support lower may be found at 2190 and 2000. Continued Upward Price Action.

German DAX Composite, $DAX
dax

The German DAX confirmed the hammer reversal from August, but by only 4 points and with a doji. The consolidation between 9265 and 10000 continues is probably the real story. The RSI has held in the 60s, bullish after working off a technically overbought condition, while the MACD is crossing down. There is support lower at 9265 and 9000 followed by 8140 to 8400. There is no resistance over 10000. Consolidation in the Uptrend.

iShares MSCI Emerging Markets Index, $EEM
eem

Emerging Markets, as measured by the ETF $EEM, pulled back hard from the break of the channel last month. The fall stalled at the 20 month SMA, but with the RSI falling through the mid line it looks like more downside despite the flat MACD. There is support at 41 and 39.20 followed by 37.70 and 35.10. resistance higher is at 42.54 and 44.50 before 45.30 and 47.70. Continued Downside.

US Equity Markets

VIX, $VIX
vix

The Volatility Index continued the wide range of the last two months and another inside Harami. It seems hard to believe the range tightened but it did and the finish under the 16.45 long term support resistance line bodes well for the market. There is resistance higher at 18.80 and 22. Support lower comes at 13.40 and 11.30 before 10. Continued Low Volatility.

SPY, $SPY
spy

The SPY probed higher in September, making a new all-time high before pulling back a bit into month end. The pullback brings it back just under the 138.2% extension of the major leg lower during the 2008 financial crisis. The pullback also helped to work off some of the technically overbought condition in the RSI. The MACD is strong but not rising as fast as it had. These all combine to support a slowing of the trend or a pause. Notice that the Bollinger bands continue to point higher and the price action has only retraced half of Augusts narrow range. No need to panic or sell everything here. In fact the price is still being attracted to the Upper Median Line of the Andrew’s Pitchfork. The round number 200 is definitely giving the SPY some pause and may do so for some time to come. The Elliott Wave analysis suggests that it may be entering Wave IV of the Major Motive Wave higher. Wave IV, a corrective wave, would be expected to be flat after Wave II was a down wave in 2010. There is support lower at 192.30 and 184.70 followed by 175. To the upside the high at 201.90 is the only barrier and the next Fibonacci Extensions are at 202.72 and 213.40. Possible Consolidation in the Uptrend.

IWM, $IWM
iwm

The IWM spent another month consolidating after the completion of the AB=CD pattern. This makes the string 10 months. The RSI has worked lower and is nearing the mid line, still in the bullish zone, with a MACD that has crossed down. These are mixed but have to favor slightly the downside. The consolidation has brought the 20 month SMA into the picture as a possible target but the Inverse Head and Shoulders Price Objective of at least 137 stands on a return higher. There is support lower at 107.20 and 87. To the upside the high at 120.40 is the only barrier. Consolidation Continues with Short Term Downside Bias for a Break.

QQQ, $QQQ
qqq

The QQQ held its ground in September after the move higher in August. This continues to give more credence to the possibility that the Bat harmonic may be morphing into a Crab harmonic. The significance is that the Potential Reversal Zone (PRZ) would move higher to over 150. The RSI is technically overbought though at this time and could use a bit of a pullback while the MACD continues to rise. The price is also smack dab in between the Upper Median Line and the Median Line of the Andrews’ Pitchfork, so either one could attract it. There is support lower at 81 and 84. The round number at 100 has proven to be resistance and there is the prior highs from 2000 as well before open space above. Continued Uptrend.

The monthly outlook suggests the consolidation for Gold and Copper may be coming to an end with a downside resolution while Crude Oil trends lower in its broad consolidation and Natural Gas reverses higher. The US Dollar Index appears strong and ready to continue higher while US Treasuries also continue to look strong. The Shanghai Composite is the strongest of the foreign markets and looks to continue higher while the German DAX consolidates under its round number of 10000 and Emerging Markets look to continue to move lower. Volatility can go either way and is testing the top of the lower range experienced since the beginning of 2013, but with the VIX in a range between the 10 and 16 not a factor at present. These factors give a positive bias to the equity index ETFs SPY, IWM and QQQ. As noted on the individual charts though the QQQs look strongest and could easily continue higher while the SPY may consolidate and the IWM continues to consolidate while watching for a downside break as a risk. 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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