Macro Week in Review/Preview 6/25/2011

Last week’s review of the macro market indicators looked for Gold to drift higher while Crude Oil headed lower. The US Dollar Index was primed to continue its upside move while Treasuries consolidated with an upside bias. Both the Shanghai Composite and Emerging Markets should see continued weakness. The Volatility Index will be important next week and is poised to move higher. US Equity Index ETF’s, were mixed but generally biased to the downside. The QQQ is the worst looking with the SPY mixed but biased lower and the IWM looking as it may consolidate. A move in the Volatility Index over 24 could trigger coordination among the Index ETF’s and a move lower. Consolidation in the weaker Indexes should bring the Volatility Index back under 20 and could lead to a trend change.

The week began with Gold and Oil acting as expected only to have Gold fall later in the week. The US Dollar Index and US Treasuries both behaved as the charts foretold. But while Emerging Markets continued lower the Shanghai Composite reversed higher at the end of the week. The Volatility Index continued to drift up as Equity ETF’s moved within their bearish ranges. What does this mean for the coming week? Let’s 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 had a rough week. On the daily chart it broke down through the rising wedge and is now through the 50 day Simple Moving Average (SMA) and the lower Bollinger band. The Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) indicator both suggest more downside to come. Stepping back to the weekly chart shows the long uptrend unaffected, but a definite consolidation move. The RSI on the weekly chart points to more downside and the MACD concurs with a bearish negative cross. Look for next week to bring more downside with support at 1485 then 1475 and the 100 day SMA at 1464 coinciding with the channel on the weekly chart. A move over 1544 would be bullish.

West Texas Intermediate Crude Daily, $CL_F

West Texas Intermediate Crude Weekly, $CL_F

Crude Oil continued its fall out of the bear flag on the daily chart, now through the 200 day SMA. The RSI looks to be settling near 30 and the MACD has also leveled as is entered the previous channel between 88 and 93. The weekly chart shows this channel and that it’s mid point is the 50% Fibonacci retracement of the 2008 move. The RSI on the weekly chart suggests more downside as does the MACD. Look for Crude Oil to continue lower but to start to find some support by the bottom of the 88-93 range next week.

US Dollar Index Daily, $DX_F

US Dollar Index Weekly, $DX_F

The US Dollar Index moved higher this week off of a higher low. It looks to be headed to test the neckline and breakdown level seen on the weekly chart near 77.10. The RSI on the daily chart is rising and the MACD is increasing. On the weekly chart The RSI and MACD also support more upside. Look for a test of the trend line higher next week at 77.10 and if through resistance higher at 78. A failure at the trendline will have Dollar bears piling in short with first support at 76.

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, have been moving in a tight range between 95.50 and 97.30 for several weeks. The daily chart offers the tangle of Fibonacci retracement levels as an explanation. The RSI has held over the mid line maintaining a bullish stance and the MACD is fairly flat as it rides the 20 day SMA support higher. The weekly chart shows the consolidation range from this same time last year. The RSI is bullish and rising on the weekly chart and although the MACD is positive it is waning. Look for more consolidation between 95.50 and 97.30 with a slight bias to the upside for the coming week. If it can get through 97.30 then a test of 102.5, the top rail on the weekly chart will come shortly.

Shanghai Stock Exchange Composite Daily, $SSEC

Shanghai Stock Exchange Composite Weekly, $SSEC

The Shanghai Composite found a bottom mid week and started higher with a vengeance printing two strong candles to end the week. The RSI and MACD on the daily chart suggest that there is more upside to come. The weekly chart shows it now likely to retest the break down level near 2800, with the RSI moving higher but the MACD lagging. Look for more upside next week with some possible roadblocks at the 2785 Fibonacci level and the 2800 lower rail and then the mid line of the symmetrical triangle at 2900. A fall back sees support in the 2590-2695 channel.

iShares MSCI Emerging Markets Index Daily, $EEM

iShares MSCI Emerging Markets Index Weekly, $EEM

Emerging Markets, measured by the ETF EEM, are basing at the 45.50 support level after a third stair step lower. The falling RSI suggests that there will be another step, although the MACD has not confirmed as it is still decreasing. The weekly chart shows room lower to the small channel above the larger channel from 2010, with the RSI and MACD both pointing lower. Look for any upside move next week to be capped at 46.70 and the bias to be to the downside out of the consolidation, with support lower at 44.60 followed by 44.15 and 43.10.

VIX Daily, $VIX

VIX Weekly, $VIX

The Volatility Index continued its drift higher with a slightly tighter range for the week. It is now firmly above all of its SMA’s on the daily chart and near previous support/resistance at 21.25 with the RSI turning higher. The weekly chart also shows the continued move higher with the rising RSI and MACD. It is near the top of the Bollinger bands and near resistance. Look for continued low range to continue next week with a drift higher. Should the VIX get over 26 it would likely signal a sharp downturn in equities.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY looked like it was going to break it’s fall this week only to end the week near the lows, with the expanding wedge still in tact. The RSI tested the mid line and rejected lower with the MACD ready to recross negative, pointing to more downside. The weekly chart shows a second doji week, building a bear flag, but signaling indecision with the RSI flat lined but the MACD diverging, pointing to more downside. Look for the SPY to continue to consolidate next week but with a slight downside bias and a move below 126.30 leading to another leg down with support at 125 and 123.50 below that. It would take a move over 130 to become bullish.

IWM Daily, $IWM

IWM Weekly, $IWM

The IWM had even more promise to break it’s fall jumping from the basing channel but then unable to break through the top of the wedge. The RSI tested the mid line and flat lined with the MACD building , pointing to the upside. The weekly chart shows a move back to the trend resistance line, with the RSI turned up, but the MACD diverging, pointing to more downside. Look for the IWM to continue to consolidate next week but with a slight upside bias in the short term. A move below 79.10 and then 77.85 leading to another leg down with support at 76.75-77 and 75.50 below that. A move over 81 would shift to a bullish focus.

QQQ Daily, $QQQ

QQQ Weekly, $QQQ

The QQQ also had a lot of promise to break it’s fall jumping from the base at previous support/resistance at 54.26 but then unable to break through the top of the wedge at 55.50. The RSI tested the mid line and rejected lower with the MACD crossing positive but then waning. The weekly chart shows a second Morning Star, but building a bear flag, signaling indecision with the RSI turning up but the MACD diverging, pointing to more downside. Look for the QQQ to continue to consolidate next week but with a slight downside bias. A move below 54.26 and then 53.60 leading to another leg down with support at 52.10. A move over 55.50 would shift to a bullish focus.

The coming week looks to bring more red to Gold and Crude Oil, although likely at a slower pace in Crude. The US Dollar Index seems headed to a test with the 3 year trend line while US Treasuries look to continue to consolidate, but with an upward bias. The Shanghai Composite looks higher if only to retest the weekly breakdown level while Emerging Markets consolidate, with a chance of more downside. Volatility looks to continue to drift higher with a spike a possible signal of a further downside move in the Equity Index ETF’s. Otherwise they look to continue to consolidate but with the SPY and QQQ biased to the downside while the IWM is biased higher. 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.

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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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