Macro Week in Review/Preview May 31, 2013

• Posted by Greg Harmon
• on May 31st, 2013

Last week’s review of the macro market indicators suggested, heading into the shortened unofficial first week of Summer, that there was some nervous caution in the markets. Gold looked to consolidate with a downward bias while Crude Oil churned in the tightening range. The US Dollar Index seemed ready for a pullback in the recent uptrend while US Treasuries were biased lower in their consolidation. The Shanghai Composite looked strong but Emerging Markets were biased to the downside. Volatility looked to remain benign keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ, despite short term pullbacks and recent new highs. Their charts showed more caution with a further pullback or consolidation likely.

The week played out with Gold moving higher before sellers can back on Friday while Crude Oil moved lower in the range. The US Dollar held at resistance before failing to end the week while Treasuries broke the consolidation moving lower. The Shanghai Composite made a higher high before retreating while Emerging Markets just moved lower. Volatility picked up off of the lows but remained subdued. The Equity Index ETF’s SPY, IWM and QQQ consolidated in triangle patterns tightening into Friday and under the highs from last week. What does this mean for the coming week? Lets look at some charts.

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Gold Daily, $GC_F

Gold Weekly, $GC_F

Gold started the week moving in an ascending triangle before breaking out Thursday and running to the declining 50 day Simple Moving Average (SMA). Friday retraced the breakout lower to test the level and held. The Relative Strength Index (RSI) is trending higher on the daily chart but currently turning lower with a Moving Average Convergence Divergence indicator (MACD) that moving higher. A mixed picture on this timeframe. Out on the weekly view the bearish picture remains. The RSI cannot get up off of the mat and the MACD just continues lower. There is support lower at 1376 and then 1328 to 1340 followed by 1260. Resistance higher comes at 1425 and then 1475 and it will take a move over that to start bullish chatter and over 1550 to confirm it. Consolidation or Bounce Continues in Downtrend.

West Texas Intermediate Crude Daily, $CL_F

West Texas Intermediate Crude Weekly, $CL_F

Crude Oil fell out of the triangle it has been moving in for the past year this week, but found support in the SMA’s that have been there all along. The RSI on the daily chart is rolling lower with a MACD that is also falling, suggesting more downside to come on this timeframe. The weekly chart is much less bearish. The tightening triangle continues to move the price action sideways with the SMA’s as the mid line. The RSI on this timeframe is oscillating around the mid line with a a MACD that is flat. No real bias. There is support lower at 90 and 88 followed by 87 and 84. Resistance higher is found at 93 and 97 followed by 100. Continued Short Term Downside in Tightening Triangle.

US Dollar Index Daily, $DX_F

US Dollar Index Weekly, $DX_F

The US Dollar Index fell out of consolidation back to the 100 day SMA before finding support. The move took it through the first target after completing the bearish Shark, at 83.36 with a second target at 82.60 nearby. The RSI on the daily chart is running lower and through the mid line with a MACD that is rolling over. It looks weaker on the daily timeframe. Out on the weekly view the picture is also bearish but less pronounced. The topping candles and long red bodies point lower. So does the falling RSI although it remains in bullish territory and above the last bottom with a MACD that is rising, to defy everything else. There is support lower at 82.60 and 82 followed by 81.40. Under that and king dollar abdicates the throne. Resistance is found higher at 84.60 and 87.50. Downside 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, had a rough week. Out of the blocks Tuesday it fell out of the blue box and did nothing but try to tread water the rest of the week. The RSI continues to hold near the technically oversold line but with no danger of turning up and the MACD is running lower on the signal line. The only bright spot is the histogram starting to improve. On the weekly chart the set up is also dim. Although the candle for the week had a tail, it made a lower low and could not recapture the 100 week SMA. The RSI is running lower and about to break the critical 40 level, moving into bearish territory while the MACD is is turning back lower. There is support at 112 and 108 below with a move under that signalling it is time for all bond holders to abandon ship. Resistance higher stands at 117.50 and 119 followed by 122 and 124. Continued Downside.

Shanghai Stock Exchange Composite Daily, $SSEC

Shanghai Stock Exchange Composite Weekly, $SSEC

The Shanghai Composite made a higher high before pulling back to end the week. The RSI is turning lower and the MACD is leveling on the daily chart so it may be in for a pullback or consolidation in the uptrend. The weekly picture shows a stall at the confluence of the rising 20 week SMA and the falling 100 week SMA. The RSI on this timeframe continues to rise with a MACD that is turning up and about to cross, supporting more upside. Resistance higher is found at 2360 and 2440 with a move over that triggering an Inverse Head and Shoulder with a price objective to at least 2940. At that level Tom DeMark will be right about his reversal call, but it better hurry. Support lower comes at 2235 and 2200 followed by 2175. Under that and the downtrend resumes. Upside Bias.

iShares MSCI Emerging Markets Index Daily, $EEM

iShares MSCI Emerging Markets Index Weekly, $EEM

Emerging Markets, as measured by the ETF $EEM, continued their move lower this week ending with an ugly near Marubozu candle down. The RSI is falling and bearish on the daily chart with a MACD that is also falling. The weekly chart shows a long Marubozu print for the week and back below the important 42.54 level. The RSI on this timeframe is making a new low as it heads lower and the MACD is continuing down. The end is not in sight yet, but perhaps the bundle of SMA can stall it. There is support lower at 40 and 38.60 followed by 35.91. Resistance higher comes at 42.54-42.80 followed by 44 and 45.40. Continued Downside.

VIX Daily, $VIX

VIX Weekly, $VIX

The Volatility Index drifted higher and ended the week above the critical 200 day SMA. The past 6 times that is has closed above this level and then retreated the market has made new highs, so this could be important. Of course it could also continue to rise above the 22 level where I told you to set your alert to start caring. The RSI on the daily chart supports more upside with a MACD that is also rising on the daily chart. But for now it is still a lower high. The weekly picture shows a break back above the 15.67 level and the falling 50 week SMA. The RSI is rising but still near the mid line with a MACD that is flat. Resistance higher comes at 18-18.5 and 22. Support lower is found at 15.67 followed by 12.40 and 10. Continued Upward Bias.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY consolidated for most of the week before falling in a long red candle Friday. The fall took it through the 20 day SMA and into the bottom half of the Bollinger bands for the first time since April 22nd. The RSI on the daily chart is falling and at the mid line, a critical level between here and 40, with a MACD that is rolling lower on both the signal line and the histogram. This view looks like more downside. Out on the weekly front the Bearish Engulfing candle follows the Spinning Top from last week, confirming it lower. The RSI is working off a technically overbought condition with a MACD that is starting to level. There is resistance higher at 166.5 and 167.50 and support lower at 163 followed by 159.72. This looks prepared for the pullback everyone has been anticipating. Continued Downside in the Uptrend.

IWM Daily, $IWM

IWM Weekly, $IWM

The IWM consolidated for the week over the 20 day SMA. The RSI on the daily chart is falling and approaching the mid line, with a MACD that is rolling lower on both the signal line and the histogram. This view looks at risk of downside. Out on the weekly front the Bearish Engulfing candle follows the Spinning Top from last week, confirming it lower. The RSI is holding near the technically overbought condition with a MACD that is leveling. There is resistance higher at 99.30 and 100 and support lower at 96.50 and 94.20 followed by 91.80. Consolidation or Pullback in the Uptrend.

QQQ Daily, $QQQ

QQQ Weekly, $QQQ

The QQQ consolidated for the week over the 20 day SMA as well. The RSI on the daily chart is falling and approaching the mid line, with a MACD that is rolling lower on both the signal line and the histogram. This view looks at risk of downside. Out on the weekly front the Bearish Engulfing candle follows the Spinning Top from last week, confirming it lower. The RSI is holding near the technically overbought condition with a MACD that is still rising, the strongest of the indexes. There is resistance higher at 74.50 and a target of 80 and support lower at 72.70 and 72 followed by 70.60. Consolidation or Pullback in the Uptrend.

Heading into June the markets look ready to take a breather and perhaps pullback. Gold though is biased higher in the short term in its downtrend while Crude Oil heads toward the bottom of its range. The US Dollar Index and US Treasuries both look to continue lower. The Shanghai Composite maintains an upward bias but may consolidate first while Emerging Markets continue biased to the downside. Volatility looks to low but drifting higher keeping the long term bias higher for the equity index ETF’s SPY, IWM and QQQ, but maybe a drag in the short run. The index ETF’s themselves appear to be weakening in their uptrends with the SPY the weakest followed by the IWM and the QQQ still showing some strength in longer charts. Use this information as you prepare for the coming week and trad’em well.

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