Macro Week in Review/Preview June 10, 2011

• Posted by Greg Harmon
• on June 11th, 2011

Last week’s review of the macro market indicators looked to continue the trend higher for Gold with Crude Oil drifting sideways to slightly higher. The US Dollar Index should continue lower while US Treasuries remain in an uptrend but with a potential reversal looming. The Shanghai Composite could continue its flag or head lower while Emerging Markets continue their flag or head higher. Volatility should remain subdued but begin watching for a break of 21.25 to change that. The Equity Index ETF’s, SPY, IWM and QQQ are all on the same page again and look lower.

The week began with Oil heading up but Gold holding near resistance. The Dollar Index started lower but reversed quickly as Treasuries continued higher. The Shanghai Composite consolidated while Emerging Markets moved lower. Amidst stable volatility the Equity Index ETF’s continued lower. What does this mean for the coming week? Lets look at some charts.

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 could not break through the resistance of the uptrend lines on the daily chart which crossed at 1549 this week. With the Relative Strength Index (RSI) pointing lower and the Moving Average Convergence Divergence (MACD) indicator crossed lower it looks headed to the rising support trend line, currently at 1525. The weekly chart shows no signs of damage to the uptrend but a bearish engulfing candle suggests lower next week. The RSI is curling lower and the MACD is waning. Both supporting further consolidation or downside. Both charts suggest Gold is ready to pullback or consolidate next week within the long uptrend. Pullbacks may find support at 1500 or 1485 if 1525 does not hold.

West Texas Intermediate Crude Daily,$CL_F

West Texas Intermediate Crude Weekly,$CL_F

Crude Oil held support of the 100 day Simple Moving Average (SMA) in a bear flag on the daily chart, just below the rising trend line resistance at 102.50. The RSI is very slightly rising and the MACD is flat but positive. These suggest more sideways to slight upward drift. The weekly chart also shows the bear flag running along the trend line and 20 week SMA. The RSI on the weekly chart has flat lined as it hit the mid line but eh MACD is slowly growing more negative. These factors suggest that Crude Oil will continue to consolidate in the slight upward drift with a chance of the flag breaking lower. Support on a breakdown looks to come first at 97-97.50 and then 93.

US Dollar Index Daily,$DX_F

US Dollar Index Weekly,$DX_F

The US Dollar Index stopped its fall at previous support and turned higher putting in a higher low. Friday it stalled at resistance at 75.62. The RSI moved sharply higher and the MACD is improving and about to cross positive. The weekly chart shows the strength of the move for the week with a long bodied white candle. The RSI has rising and the MACD has crossed positive supporting more upside. Look for the run higher to continue next week with resistance coming at 76 and then 77 which would bring it close enough to expect a retest of the breakdown trend line at 77.75.

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

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

US Treasuries, measured by the ETF TLT, just look good for more upside. The daily chart shows the RSI moving higher again and the MACD starting to improve. The weekly chart shows continued consolidation over the 96 mid line of a symmetrical triangle. The RSI on the weekly is trending higher and the MACD is growing with volume picking up. Look for continued upside movement next week with 97.80 and 98.37 as resistance before a run at the top rail.

Shanghai Stock Exchange Composite Daily,$SSEC

Shanghai Stock Exchange Composite Weekly,$SSEC

The Shanghai Composite continued its bear flag this week with a test lower on Friday. But the daily chart shows the RSI curling back lower short term and the MACD flat and trying to curl down again. The weekly chart shows the bear flag on support at 2700 with a RSI and MACD pointing lower. Look for more consolidation or downside continuation next week with support first at 2571-2590 and then 2500.

iShares MSCI Emerging Markets Index Daily,$EEM

iShares MSCI Emerging Markets Index Weekly,$EEM

Emerging Markets, measured by the EEM ETF, consolidated all week and then moved lower on a Bearish Kicker Friday to the 200 day SMA. The RSI moved lower through the mid line and the MACD crossed lower on the daily chart. The weekly chart shows this all happened as it failed at resistance in the channel. The weekly RSI and MACD also suggest more downside. Look for a move toward the channel bottom at 44.3 on the weekly chart next week with resistance at 46 and 45 along the way.

VIX Daily,$VIX

VIX Weekly,$VIX

The Volatility Index remained at relatively low levels this week. The difference this week was that it was a much tighter range than it has been since early April. The story continues with the RSI and MACD on both timeframes moving sideways along with all the SMA’s. It is at the top of the lower range so watch for a break above the 20 level and then a hold over 21.25 to indicate that the stability is ending.

SPY Daily,$SPY

SPY Weekly,$SPY

The SPY had a horrible week only pausing shortly at the 144 day SMA Thursday before getting pummeled again Friday. The RSI is pointing lower still on the daily chart as is the MACD, while the volume has been increasing. The weekly chart shows a break of the downtrend line from the March 2009 lows with a RSI pointing steeply lower and the MACD growing more negative. The volume has been growing on the move lower on the weekly timeframe also. Look for more downside next week with support lower at 127.10 then 126.30 and 123.50. 128 and 129 will offer upside resistance.

IWM Daily,$IWM

IWM Weekly,$IWM

The IWM also had a horrible week pausing shortly at the support/resistance line at 79.10 Wednesday and Thursday before dropping again Friday. The RSI is pointing lower still on the daily chart as is the MACD. The weekly chart shows a break of the downtrend line from the March 2009 lows with a RSI pointing steeply lower and the MACD growing more negative. The volume has been growing on the move lower the last few weeks on the weekly timeframe. Look for more downside next week with support lower at 77.85 then 77.00 and 75.60. 79.10 and 80 will offer upside resistance.

QQQ Daily,$QQQ

QQQ Weekly,$QQQ

The QQQ also had a horrible week pausing shortly between 55 and 55.50 Wednesday and Thursday before dropping again Friday. The RSI is pointing lower still on the daily chart as is the MACD. The weekly chart shows a break of the downtrend line from the March 2009 lows with a RSI pointing steeply lower and the MACD growing more negative. The volume has been growing on the move lower the last few weeks on the weekly timeframe. Look for more downside next week with support lower at 54.26 then 54 and 53.40. 55.50 and 56.20 will offer upside resistance.

Next week sets up as a bizarro week for any macro economic follower. Gold and Oil look set to consolidate or go lower and the US Dollar Index and US Treasuries look to continue higher. Both the Shanghai Composite and Emerging Markets look lower next week. Despite falling equity markets Volatility looks to remain subdued. The US Equity Index ETF’s , SPY, IWM and QQQ all look to have more downside with the weekly charts more ugly than the daily charts. Also all three are moving lower in the same pattern indicating this is a total equity market selloff not sector or capitalization specific. Use this information to understand the major trend and how it may be influenced as you prepare for the coming week ahead. Trade’m well.

Editorial Note: My service provider is no longer providing open-hi-lo, but only close data for Gold, Crude Oil and the US Dollar Index on the daily charts. I will be making a decision about substituting ETF’s for these going forward vs using close only data. If you have a preference please leave your thoughts in the comments.

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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.

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