Macro Month in Review/Preview October – November 2011

With the markets in turmoil I have decided to keep the monthly view public for now to provide you all with broader clarity against the short term swings.

Last month in this space my Monthly Macro Review/Preview suggested outlook suggests that Gold and Copper will continue lower as will Crude Oil and Natural Gas. The US Dollar Index and US Treasuries look to have more upside in the next few months. All three foreign markets, the Shanghai Composite, the German DAX and Emerging Markets all look to continue to move lower as well. Volatility can go either way but looks to remain elevated and biased to move higher. The Equity Index ETF’s SPY, IWM and QQQ are set up to continue lower in the coming months. As noted on the individual charts there is room for some short term upside without breaking the downward bias. As long as Copper is set up to continue lower and the US Dollar and US Treasuries are biased higher the US Equity Markets will have a hard time rising. With all global equity markets also flashing lower it suggest a sluggish global economy which is another negative for the US Markets.

Gold and Copper held lower creeping off the floor, while in the fuels Natural Gas did continue lower while Crude oil reversed back higher. The US Dollar Index and US Treasuries both fell from their peaks but remained in the upper end of the zone. The Shanghai Composite, the German DAX and Emerging Markets, all found a bounce in their downtrends with the German DAX and Emerging Markets attempting reversals. true to the charts and moved higher, a lot higher, while the US Dollar Index and Crude Oil consolidated. The Shanghai Composite and Emerging Markets also drifted lower as anticipated in the charts. Volatility rode lower and created a supportive environment for the US Equity Index ETF’s. A month that moved against many technicals. But did this change the big picture? Let’s look at some charts.

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

Metals

Gold, $GC_F

Gold held support of the rising trendline and could not manage to get over the previous trend resistance. Despite printing a positive month it confirmed the Tweezers top lower, a low reliability pattern but something to watch into November. Otherwise the uptrend long term remains in tact with the Relative Strength Index (RSI) still very bullish and the Moving Average Convergence Divergence (MACD) indicator continuing to hold with the components rising. Look for more upside in the long term with a possible short term pullbakc to 1580 or 1500. Long Term Bullish

Copper, $HG_F

Copper found support near the 50 month Simple Moving Average (SMA) but remained in the wide consolidation zone between 3.00 and 4.00 where most of the volume of the last 6 years has traded. It is being drawn back to the Median Line of the bullish green Pitchfork. The Bollinger bands remain tight as the RSI bounces off the 40 level to remain bullish and the MACD diverges becoming more negative. Copper is a mixed bag long term and it will take a move back above 4.00 or failure and a fall under 3.00 to change that. In the intermediate term look for it to remain between 3.25 and 3.75. Long Term Unclear, Intermediate Term Consolidating

Fuel

West Texas Intermediate Crude, $CL_F

Crude Oil jumped higher for the month but remained captured under the Upper Median Line of the bearish red Pitchfork. The RSI found support at the mid line and is kinking higher while the MACD remains negative, but barely and flat. The bullish engulfing candle suggest higher prices in the short run if confirmed. It will take a move over 95 and up to 1100 to trigger a bullish trend on the intermediate timeframe. Until then the short term remains biased lower with support at 80 and below that you can start to think about a long term trend change to lower. Long Term Bullish, Intermediate Term Lower

Natural Gas, $NG_F

Natural Gas continues to look horrible despite having a positive month. The RSI kinking higher is still in the low 40’s and the MACD remains on a slow slope to zero. The Bollinger bands are also continuing to tighten foreboding a move, and with all the SMA’s sloping lower the bias is to the downside. Support remains at the rising trendline near 3.50 and it may be tested soon. Below that comes 3.00. Long Term Bearish, Intermediate Consolidation

Currency & Debt

US Dollar Index, $DX_F

The US Dollar Index rejected lower from the confluence of the 50 and 50 month SMA’s, back below the rising trendline. Along with this the RSI failed at the mid line and is heading lower, with a MACD that looks like it is going to glance off instead of cross. The SMA’s slope lower continue to suggest more downside with support at the 72.5-74 area and then a a free fall below. Long Term Bearish, Intermediate Consolidation

US Treasuries, $TLT

US Treasuries, as measured by the ETF TLT, pulled back from a higher spike up but continued to hold above the Bollinger bands, The RSI remains elevated and kinking lower while the MACD continued to grow more positive. It remains very extended from the SMA’s, although they are all sloping higher. Long Term Bullish, Intermediate Consolidation

Foreign Markets

Shanghai Stock Exchange Composite, $SSEC

The Shanghai Composite caught a bid in October at the rising 100 month SMA but the intermediate term trend remains lower. It also remained below the rising trendline resistance from the mid 2005 lows. The Measured Move on a continuation lower takes it to 2100.and the weak RSI, flat MACD and falling SMA’s support that as it leans on teh bottom Bollinger band. Long Term Bearish

German DAX Composite, $DAX

The German DAX caught a much bigger bid, printing a bullish engulfing candle for the month that if confirmed higher would set a target of 7500 and then 8000. But the area from 6050-6150 has been trouble. The SMA’s remain jumbled, and the RSI turning higher is diverging from the MACD that is increasing in the negative direction. Al this continues to take place within the consolidating ascending triangle. Long Term Consolidation, Intermediate Term Bearish

iShares MSCI Emerging Markets Index, $EEM

Emerging Markets touched the Lower Median Line of the bullish green pitchfork and bounced higher printing a bullish Piercing candle for the month, some might call it a bullish engulfing. The halt to the down move happened at the bottom of the Bollinger bands and the retest from above of the 38.2% Fibonacci level from the major move higher from 2003. The intermediate term move higher still need to be confirmed with a higher close in November to reverse it to an up trend within the broader up trend. Long Term Bullish, Intermediate Lower

US Equity Markets

VIX, $VIX

The Volatility Index printed a bearish engulfing candle for the month suggesting a move back lower but in fact finishing at the 30 support level. It is now back with in the Bollinger bands so it could continue lower or just consolidate. A move below 30 would confirm a lower range going forward. Until then the up trend from June remains. Long Term Bullish, Intermediate Uptrend

SPY, $SPY

The SPY rose off of the confluence of the 50 and 100 month SMA’s and a pullback test of the 61.8% Fibonacci level to rise to touch the Upper Median Line of the bearish red Pitchfork, just above the Median Line of the bullish green Pitchfork. As it rose the RSI bounced off of the mid line remaining bullish and the MACD that had turned negative was flat month over month. A move higher in November will confirm the intermediate trend change to higher within the longer term bull market. Long Term Bullish, Intermediate Down

IWM, $IWM

The IWM rose off of the confluence of the 50 and 100 month SMA’s as well and a pullback test of previous support at the 65 level to rise toward the Upper Median Line of the bearish red Pitchfork, and touch the Median Line of the bullish green Pitchfork, printing a bullish engulfing candle. As it rose the RSI bounced back over the mid line remaining bullish and the MACD that had turned negative was flat month over month. A move higher in November will confirm the intermediate trend change to higher within the longer term bull market. Long Term Bullish, Intermediate Down

QQQ, $QQQ

The SPY rose off of the 20 month SMA and neckline of the Inverse Head and Shoulders at 50 to rise to touch the Upper Median Line of the bearish red Pitchfork, just above the Median Line of the bullish green Pitchfork. As it rose the RSI bounced off of the mid line remaining bullish and the MACD that had turned negative improved month over month. A move to new highs in November will confirm the intermediate trend change to higher within the longer term bull market. Long Term Bullish, Intermediate Consolidation

The monthly outlook suggests the upside for Gold will continue while Copper consolidates and is bullish for Crude Oil and bearish for Natural Gas. The US Dollar Index looks to continue the long term trend lower while Treasuries continue to rise. In foreign markets the Shanghai Composite look to continue to move lower while the German DAX consolidates and Emerging Markets continue the long term trend higher with the intermediate term joining that trend. Volatility can go either way within the long term uptrend but looks to remain above the lower range experienced in the last six months. Despite that uncertainty, the Equity Index ETF’s SPY, IWM are set up to continue lower in the coming months with the QQQ consolidating, all within the longer term uptrend. As noted on the individual charts there is a need for confirmation of the recent moves in the short term to the upside to change the downward bias. 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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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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