Macro Week in Review/Preview March 3, 2012

Last week’s review of the macro market indicators looked heading into the last week of February that the market looks similar to the previous week with a few changes. Gold looked strong and ready to continue higher as Crude Oil might pause in its upward move. Both US Treasuries and the US Dollar Index looked better to the downside with a continued move lower by the Dollar likely. The Shanghai Composite and Emerging Markets both looked better to the upside with the Chinese market likely to continue its move upward. The Volatility Index might not drop much more if at all but looked unlikely to rise soon either. These influencers created an environment for the Equity Index ETF’s SPY, IWM and QQQ to continue higher and the charts of the SPY and QQQ supported the intra-market view. The IWM was biased higher, but needs to break a consolidation range before it can travel higher. A major move lower by the US Dollar or a breakdown by US Treasuries could accelerate Equities higher.

The week began with Gold holding and trying higher and Crude consolidating, acting as the charts suggested, before Gold was smacked hard midweek. The US Dollar found a bottom and started slowly higher while Treasuries continued in their tightening range. The Shanghai Composite stalled and pulled back before moving again and Emerging Markets peaked over their recent range. Volatility drifted slightly lower but held above last weeks low. With the backdrop of these moves the Equity Index ETF’s, lost speed with IWM pulling back, SPY consolidating and the QQQ stalling at the end of the week. How does this impact the view for the week ahead? Let’s look at some charts.

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Gold Daily, $GC_F

Gold Weekly, $GC_F

Gold consolidated early in the week before tumbling from a Tweezers Top on Wednesday. It was caught by the 100 day Simple Moving Average (SMA) and held there the rest of the week. The Relative Strength Index (RSI) fell sharply but held in bullish territory in the daily chart while the Moving Average Convergence Divergence (MACD) indicator crossed negative, a bearish divergence. On the weekly chart the RSI turned back at the 60 level and the positive MACD is now heading back to zero. It printed a bearish engulfing candle on this timeframe on support of the long rising channel and now back within the intermediate term falling channel that it broke last week. A failed breakout. There is support lower at 1680 and 1628. If the channel holds resistance higher comes at 1755 and 1786 followed by 1800 and 1900. A tough read right here. Long Term higher, Intermediate Term consolidation up trend and Short Term consolidating a Downward Move. Watch for a under 1700 or over 1800 for clarity. LT Uptrend, Int Term Uptrend Consolidation, ST Consolidation Down Move.

West Texas Intermediate Crude Daily, $CL_F

West Texas Intermediate Crude Weekly, $CL_F

Crude Oil fell from 110 resistance to start the week and bounced at 104.84 the two resistance/support points from September 2008. It looks to be in a range building a bull flag between them. The RSI on the daily chart is pulling back but bullish. If it were to turn back higher it would create a 3 day Positive Reversal with a target at 111.55. The MACD is positive but has been fading. On the weekly timeframe it shows consolidation after a move higher with a bullish RSI and a and a MACD that is positive and growing. Resistance higher comes at 113.50 before targets at 121.39 and the 2008 high. Support lower below the flag is at 100 and 93. Consolidation in a Uptrend.

US Dollar Index Daily, $DX_F

US Dollar Index Weekly, $DX_F

The US Dollar Index consolidated at the previous trendline support early in the week before running higher to end the week. The RSI on the daily chart is rising and headed to a new higher high near a bullish turn while the MACD has turned positive again. Both support more upside. The weekly chart shows a bullish engulfing candle approaching the Arc with a RSI that has remained bullish and is rising again. The MACD is negative but looks to be improving or at least stopped its path lower. There is resistance higher at 79.60 and over that a bullish trend can begin with resistance higher at 80.30 and 81.60. Support on a fall back comes at 78.20 and 76.50 lower. Neutral with an Upward Bias.

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

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

US Treasuries, as measured by the ETF $TLT, continued the consolidation within the descending triangle within the broader wedge. The daily chart shows a RSI that has been channeling lower but failed to reach the bottom of the channel the last two moves lower but a MACD that is fading toward the zero line. It does look as if it may glance off rather than cross though averting the negative divergence. The weekly chart shows the consolidation zone continuing with a RSI that is holding bullish and may be turning back higher. The MACD on this timeframe is also beginning to improve. Resistance higher comes at 118.67 and 122 and above that the targets on Measured Moves to 135 and 153. Support below 115 comes at 110 and 103. Consolidation Continues with a Shift Towards an Upside Bias.

Shanghai Stock Exchange Composite Daily, $SSEC

Shanghai Stock Exchange Composite Weekly, $SSEC

The Shanghai Composite built a bull flag early in the week and began a potential move higher out of it Friday. The RSI on the daily timeframe is rising and bullish and the MACD looks to be heading higher against after a short move toward the zero line. The 50 day SMA is turning up joining the 20 day SMA. All bullish signs. On the weekly timeframe the trend higher continued with the RSI on the edge of turning bullish and the MACD positive and growing more so. Resistance is found higher at 2540, over which the downtrend ends, and 2600 and support lower at 2360, 2320 and 2160. Up Move Continues.

iShares MSCI Emerging Markets Index Daily, $EEM

iShares MSCI Emerging Markets Index Weekly, $EEM

Emerging Markets as measured by the ETF $EEM broke out of their consolidation from the past 3 weeks and moved higher. It has support on the daily chart from a bullish and strong RSI and a MACD that is improving towards a positive cross. On the weekly chart the bigger white candle signals the beak higher. The RSI continues to rise in bullish territory and the MACD remains strongly positive. There is resistance higher at 48.20 and then the previous highs. Support on the downside comes at 42.54 and 35.91. Continued Uptrend.

VIX Daily, $VIX

VIX Weekly, $VIX

The Volatility Index continued its downward move but with a slowing slope as it continues to nestle against support. The RSI on the daily chart is heading lower again as the MACD holds flat. On the weekly chart the RSI looks to be bottoming as well with a MACD that is improving toward the zero line. There is support lower at 15.67 and 12.40 and resistance higher at 18 and 21.25 before 24. A move over 24 will certain lead or accompany a move lower in equities. Continued Drift Lower.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY continued its recent pattern of a move higher to start the week and consolidation thereafter. The RSI on the daily chart remains strong and bullish with the MACD continuing to drift along the zero line, without direction. All of the SMA’s except the 200 day SMA are sloping higher and under price. The Bollinger bands are tightening as it holds above 20 day SMA, foreboding a move soon. On the weekly chart the Fan line continues to play resistance with a RSI that is bullish and trending higher with a MACD that is positive, supporting more upside. There is resistance higher at 139.80 and then 143. Support on a pullback comes at 134.95 followed by 134 and 130. Trend Remains Higher.

IWM Daily, $IWM

IWM Weekly, $IWM

The IWM fell out of its consolidation zone between 81.57 and 83.75 ending the week with a long red candle. The RSI on the daily chart continues to run lower, but remains bullish, as the MACD is negative and continues to grow more so. A downward bias on this timeframe. The weekly chart shows a fall from the flag but no real damage to the bull trend. The RSI on this timeframe is near bullish but turning lower while the MACD is fading from its high. The volume on the crack of consolidation lower was relatively higher. All indicate a pullback in the uptrend may be occurring. Support comes lower at 80 and 79.10 followed by 76.60. Resistance on a return higher comes at 81.57 and 83.75 followed by the 85.80 previous high. Possible Pullback in an Uptrend.

QQQ Daily, $QQQ

QQQ Weekly, $QQQ

The QQQ was the strongest of the Equity Index ETF’s continuing higher on the week but ending with a doji. The RSI on the daily chart remains technically overbought, over 70 but is moving sideways, as the MACD is holding near zero after fading for over 2 months. On the weekly chart it touched the 138.2% Fibonacci extension of the major down move on the way towards the Diamond breakout target at 69. The RSI on this timeframe is continuing to tend higher in bullish territory with a MACD that is positive and rising. All looks well. Support lower comes at 61.08 and 59.60. Continued Uptrend.

Heading into the first full week of March the market still looks strong but is showing signs of a needed rest in some areas. Gold, the enigma, looks lower in the very short term but positive on an intermediate and long term basis while Crude Oil is consolidating in an uptrend. US Treasuries remain in their consolidation zone but are looking slightly better to the upside while the US Dollar Index appears to have found a bottom and ready to work higher as well. The Shanghai Composite and Emerging Markets both continue to look higher into next week. Volatility looks biased to the downside but has little room lower, while it certainly does not look ready to turn higher. These influencers set the stage for the US Equity Indexes to consolidate within their uptrend. A move lower by the US Dollar Index or Treasuries should change that to continue the rally higher. The charts of Equity Indexes are mixed though. The QQQ remains very strong while the SPY is starting to look ready to consolidate and the IWM may pullback. A hard move higher by the QQQ or lower by the IWM, dragging the SPY with either could set the direction for the next few weeks. Use this information as you prepare for the coming week and trade’m well.

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