Macro Week in Review/Preview October 21, 2016
- Posted by Greg Harmon
- on October 21st, 2016
Last week’s review of the macro market indicators noted that heading into October Options Expiration week the equity markets continued to show some weakness, especially in the small caps. Elsewhere looked for Gold to consolidate with a downward bias if it resolved soon while Crude Oil continued to plow higher. The US Dollar Index also looked to continue higher while US Treasuries continued lower.
The Shanghai Composite and Emerging Markets looked best to continue to bide time moving sideways. Volatility looked to remain at low levels but creeping higher, sucking out the tailwind from the equity index ETF’s SPY, IWM and QQQ. Their charts showed clear weakness in the IWM, with the SPY and QQQ a little stronger short term. The QQQ was the best looking longer term.
The week played out with Gold lifting out of consolidation to end the week up while Crude Oil started started to break its flag higher but failed late in the week. The US Dollar continued its move higher after early consolidation while Treasuries found support and bounced mildly. The Shanghai Composite drifted higher while Emerging Markets started higher but then stalled the rest of the week.
Volatility moved lower all week ending near its SMA cluster. The Equity Index ETF’s moved in narrow ranges all week, opening lower and then drifting up by mid week, with the SPY and IWM giving back most of the gains, while the QQQ held up better. What does this mean for the coming week? Lets look at some charts.
Gold started the week holding under the 200 day SMA in consolidation. It moved higher early in the week and then printed a Tweezers Top Wednesday and Thursday as it crossed the 200 day SMA. That did not confirm Friday though as the price held over the 200 day SMA. The daily chart shows a RSI moving up but still well short of the mid line while the MACD is crossed up and rising. These support more upside.
The weekly picture shows the bounce happening at the lower Bollinger Band®The RSI on this timeframe is turning back up after making a lower low, while the price did not, the definition of a Positive RSI Reversal. This gives an upper target to 1400 if it can continue and pull out of the consolidation. The MACD is still bearish though and running lower. There is support at 1245 and 1210 followed by 1200. Resistance comes at 1278 and 1300 followed by 1310 and 1340. Consolidation with an Upward Bias.
Crude Oil tried to break out of its bull flag mid-week, pressing to 52, but could not hold there. It fell back to the flag and close the week slightly higher. The daily chart has a RSI that is in the bullish zone while the MACD flat after along with the price flag. The weekly chart gives a more bullish picture. Price continues to hold over the triangle break out with the Bollinger Bands opening higher. The RSI on this timeframe is also in the bullish zone and rising, while the MACD has been flat but is turning up. There is resistance at 51.50 and 53 followed by 56 and 60. Support lower comes at 50 and 48 followed by 47 and 44.50. Consolidation with an Upward Bias in the Uptrend.
The US Dollar Index stared the week consolidating the recent move higher. But Thursday ended that is it continued higher with follow through Friday. It is now at a 8 month high with a RSI that is bullish and a MACD rising. Both momentum indicators are starting to get overheated so a slowing or pause may come soon. The weekly chart is just flat out bullish in the intermediate term. The RSI is rising into the bullish zone with the MACD crossing the zero line as the Bollinger Bands expand higher. There is resistance at 99 and 100 followed by 100.40. Support lower comes at 98.30 and 97.40 followed by 96.50 and 95. Continued Upward Price Action within the Broad Consolidation.
US Treasuries had a good week. They moved higher From Monday onward, ending the week back over their 200 day SMA. This did not do a lot to confirm a reversal though as they also ended at the dropping off point from last week. The daily chart shows a RSI rising but well short of the mid line with the MACD about to cross up. On the weekly chart the bullish candle held over the 50 week SMA as it trends lower. The RSI on this timeframe is also trending lower with a MACD falling. There is support at 132.25 and 130.80 followed by 129. Resistance comes above at 133.25 and 134.25 followed by 135.25 and 136. Short Term Bias Higher in the Downtrend.
The Shanghai Composite continued its slow drift higher on the week. As it approaches 3100 the RSI on the daily chart is rising and bullish with a MACD trying to turn higher. The weekly chart shows the move higher in the rising channel continuing. The RSI is moving up over the mid line on this timeframe with the MACD stalling at the zero line. There is resistance at 3160 and 3280 followed by 3360. Support lower comes at 3000 and 2920 followed by 2850. Continued Drift Higher.
Emerging Markets gapped higher on Tuesday but then held there, over the 20 and 50 day SMA’s, for the rest of the week. To be fair the move up was a really small gap as well. The daily chart shows a RSI holding around the mid line as the MACD is trying to cross up. The weekly chart looks at this as just more consolidation after the run higher. The RSI is in the bullish zone and the MACD is about to cross down though. If it wants to keep all the bulls this would be a good place to start moving higher. There is resistance at 38 and 38.90 followed by 40 and 41. Support lower comes at 37 and 36 followed by 35.30 and 34.40. Continued Consolidation.
The Volatility Index started the week with a push to the upside. That did not last more than an hour though and it fell back. it continued lower the rest of the week, ending down over 17%. The daily chart shows it now below all of its SMA’s with a RSI that is falling and a MACD crossed down and falling. On the weekly front volatility remains in check as well. The RSI on this timeframe is holding at the mid line with the MACD slowly rising. There is resistance at 15.67 and 18 followed by 22 and 24. Support lower comes at 12.40 and 11.50 followed by 10. Continued Low Volatility.
The SPY started the week moving lower. It ended the day Monday at its lower Bollinger Band®, near the low of the day. Tuesday saw a bounce back higher that stalled and reversed at the Friday open price and the 100 day SMA. A little bounce to the upside Wednesday stalled at the 100 day SMA again then pulled back Thursday and opened with a gap down Friday. That gap filled and it closed up for the week.
Sounds exciting huh? Not really, the entire range of the week was less than 2.5 points, slightly over 1%. The price remains under the 20 and 50 day SMA’s. And the daily chart shows the RSI is holding under the mid line and has turned flat. The MACD has a slowly rising slope and may be ready to cross to the upside, but is certainly not showing any strength.
The weekly chart shows a positive week with a small body consolidating candle following the down week. The RSI on the longer timeframe is holding over the mid line while the MACD is falling. There is resistance at 214 and 215 followed by 215.70 and 217. Support lower comes at 212.50 and 210.20 followed by 209 and 207.10. Consolidation with a Downward Bias Short Term.
The IWM stayed in a tight 2 point range for the week as well. The price remains under the 20 and 50 day SMA’s and holding over the 100 day SMA. The daily chart has a RSI is holding at the edge of the bullish zone with a MACD leveling after falling. The weekly chart shows a small body consolidating candle following the down week, right on top of the 20 week SMA. The RSI on this timeframe is holding over the mid line while the MACD is crossed down and falling. There is resistance at 121.40 and 122.50 followed by 124 and 126. Support lower comes at 120.50 and 119 followed by 118.20. Consolidation.
The QQQ also started the week moving lower to the Bollinger Bands® and bounced back. It ended with a less than 2 point range for the week but over the 20 and 50 day SMA’s. The daily chart shows the RSI lifting off of the mid line with a flat MACD. The weekly chart shows consolidation. The RSI on the longer timeframe is holding firmly in the bullish zone while the MACD is turning lower. There is resistance at 119 and 120.50. Support lower comes at 118 and 117 followed by 115.75 and 114. Consolidation with a n Upward Bias Short Term.
Heading into the last week before the election equity markets look stable long term and mixed in the short run with the QQQ leading and the SPY falling. Elsewhere look for Gold to continue to press higher short term while Crude Oil continues to show its strength. The US Dollar Index is also strong moving higher while US Treasuries are bouncing short term in their downtrend.
The Shanghai Composite continues to drift higher while Emerging Markets mark time in consolidation. Volatility looks to remain subdued and falling, adding a tailwind to the equity index ETF’s SPY, IWM and QQQ. They are mixed short term though with the QQQ moving higher the IWM flat and the SPY at risk for more downside. Use this information as you prepare for the coming week and trad’em 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.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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