Macro Week in Review/Preview December 10, 2010

Last week’s review of the macro market indicators suggested higher prices for Gold and Crude Oil and further weakness from the US Dollar Index and US Treasuries. US and Emerging markets were moving and expected higher. The Chinese market looked to move slightly lower before it can recover.

Gold and Oil did sprint out of the blocks early setting new highs, with US Treasuries hitting a new low mid week. The US Dollar Index opened down on its lows for the week but bounced taking down Gold and Oil. Equities were slow to move but the Russell ETF, IWM, stepped up and pulled the other higher. Rate hike concerns in China have kept the Shanghai Composite range bound until a decision is announced after the markets close Friday. what does this mean for the markets next week? Let’s take a look at the charts.

(As always you can see these individual charts and more on my twitter feed and on chartly.)

Gold Daily

Gold Weekly

On the daily chart Gold continues to hold over the support of the 20 day Simple Moving Average (SMA). There is support lower at 1364 and then 1330. It is also holding above a Relative Strength Index (RSI) of 50 and remains bullish. The Moving Average Convergence Divergence (MACD) is crossing higher and should pull the indicator up. Resistance can be found at 1387 and then 1394 and 1410 on the daily chart. Turning to the weekly chart Gold held support of the 1370 level and has support lower at 1330. The resistance at the mid line of the rising channel is now at 1412 and the top rail at 1490. The MACD and RSI are still helping Gold, and all of the SMA’s are rising. The trend for Gold is still up trend.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly

Crude Oil broke through the 88.50 resistance level this week but could not hold it as support. The daily chart shows a bull flag. If the flag breaks higher there is resistance on the daily chart at the rising trend line currently near 91. The daily chart also has support lower at 87 and then 86. The RSI and MACD are tailing and will allow for a healthy pullback to support. On the weekly chart Oil continues to trend higher pressing against the Bollinger band. Although consolidating this week it held above the previous highs from early November. The RSI and MACD are facilitating a further rise and the SMA’s are now lifting. Above 88.50 it is in a channel with top resistance at 100. Although there maybe a short term pullback Oil looks higher in the longer term.

US Dollar Index Daily

US Dollar Index Weekly

The US Dollar Index has been riding the 20 day SMA higher since falling to it last Friday. The 100 day SMA has been a resistance area on a closing basis, but the Index has probed higher and lower, printing 4 Long Legged candles, the last two Doji. This is some indecision. Is that a bear flag? The weekly chart shows the rising price trend line and the last few candles resemble a bull flag holding just below resistance of 80.28. If the bear prevails there is support below the 20 day SMA at 79. If the bull prevails and it continues to ride higher then there is resistance on the daily chart at 80.34 and then 80.54 and on the weekly chart at 80.86 and then 81.19.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly

Treasuries as measured by the TLT fell hard this week and have struggled to hold at the 61.8% retracement of the up move at 93.76. Resistance above that level is at 95.53-96.15 where the falling 20 day SMA has recently crossed lower through the 200 day SMA. That cross looks to have been a catalyst for the fall. The lower Bollinger band is holding it up as support and there is further support at 92 below and then 90 on the daily chart. The falling RSI and MACD are supportive of a move lower. on the weekly chart it is following the trendline down with resistance near at 95.82, and then 97.69. Volume is increasing on the ride down and the RSI and MACD show that there is room t continue lower still. Any bounce looks to be short lived.

Shanghai Stock Exchange Composite Daily

Shanghai Stock Exchange Composite Weekly

The Shanghai Composite has been a dud since I started to include it a couple of weeks ago. The same bear flag is there on the daily chart between the 50 and 20 day SMA’s as resistance and the 100 and 200 SMA’s as support. The weekly chart shows a tightening symmetrical triangle nearing the apex, and sitting on the support of the 20 , 50 and 100 week SMA’s. The RSI and MACD are close to neutral on the both charts but the Bollinger bands are squeezing hard on the daily chart. News of any policy change from the Bank of China tonight could set this in motion. My bias is to the downside given the bear flag on the daily chart.

iShares MSCI Emerging Markets Index Daily

iShares MSCI Emerging Markets Index Weekly

The Emerging Market ETF seems to be meandering near support on the daily chart. The 20 and 50 day SMA’s and prior resistance have created a zone of resistance and support from 46.09 to 46.40. If it can break the zone higher then there is further resistance at 47 followed by 48.50. The weekly chart is much neater and shows a consolidation in a bull flag above the channel that it broke out of 3 months ago. The target for the move remains at 55 and there is support at 44.38 from the 20 week SMA and then the channel at 43.40. Anybody’s guess where this goes Monday but it looks higher in the mid term.

VIX Daily

VIX Weekly

Volatility appears to be heading lower. The VIX lost 17.90 support this week and is now in a bear flag looking lower on the daily chart. The weekly chart also looks lower for volatility, falling out of a broadening wedge. There is support just under 17 and then just under 16. All of the SMA’s on the daily chart are pointing lower and will act as resistance as will the long term level of 21.25.

SPY 60 minute

SPY Daily

SPY Weekly

Looking first at the 60 minute chart on the SPY it is easy to see that after breaking out of the descending triangle it has marched higher. The target for the pattern is about 126. Widening out to the daily chart shows a healthy move up along the top of the Bollinger bands with rising SMA’s, RSI and MACD. There is resistance higher on the daily chart at 124.97 from September 2008 and it looks to test that very soon. The weekly chart shows a retest of the 118.50 to 118.80 area holding and then a move higher. Above the 124.97 resistance the weekly chart shows further resistance at 127 and then 131.36. Support lower can be found at 123 and then 120.89 on the daily chart and then 118.50 from the weekly chart. The SPY looks good from all three timeframes.

IWM Daily

IWM Weekly

IWM broke through the December 2007 highs at 76.75 this week and the consolidated before moving higher Friday. The RSI and MACD are rising along with all the SMA’s. IWM looks to be heading higher to resistance at 79.10 from November 2007. The weekly chart looks even better with the IWM breaking the falling trendline resistance and the neckline of an Inverse Head and Shoulders pattern. The weekly chart shows resistance next at 81.57 and an ultimate target for the Head and Shoulders Pattern at 114.3. Below the 76.75 support level there is further support at 76 and 74.23. This looks very bullish.

QQQQ Daily

QQQQ Weekly

The QQQQ is also breaking higher through a resistance area from October 2008 at 54.26. This level is now support along with 54 and then 53.20 from the daily chart. The MACD ad RSI on the daily chart are moving higher adding to the bull case. The next resistance comes at 60 from November 2000. The QQQQ also broke a Inverse Head and Shoulders neckline on the weekly chart in October. The target for that pattern is ultimately at least 75. Some resistance can be expected at 65.32, 138.2% of the down move, along the way. The weekly chart shows additional support points at 52 and then 50.44 lower. This is also very bullish.

In summary next week looks for equity markets to continue higher and longer term they look very bullish. The shrinking Volatility Index will only help this trend. US Treasury Bonds should peak soon and the reverse to resume their trend lower. Crude Oil and Gold are preparing to move higher and the US Dollar Index may join them, if only for a brief time. The Shanghai Composite will look to break its flag, probably lower and the Emerging markets ETF will bounce around as it consolidates in a longer term trend that looks higher.

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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