Macro Week in Review/Preview February 11, 2011
- Posted by Greg Harmon
- on February 11th, 2011
Last week’s review of the macro market indicators looked for Gold to continue higher with Crude Oil to continue consolidating with a bias to the downside if it breaks. The US Dollar Index looked to continue higher with US Treasuries lower. The Shanghai Composite would start trading again mid week and continue higher with emerging markets continuing their broad range consolidation with a bias to the upside. The Volatility Index should remain volatile but not so much that it dictates direction of the market. The equity index ETF’s looked to continue their moves higher next week.
Gold did move higher as we progressed through the week, but Crude Oil did not consolidate but rather started and trended lower. The Dollar Index hovered with a slight upward bias but US Treasuries moved mainly sideways although they tested new lows. The Shanghai Composite did move higher and Emerging markets continued a broad sideways move. The Volatility Index remained in a tight range near last weeks close, allowing Equity markets to make new highs. What does this mean for options expiration week next week? Let’s look at the charts.
As always you can see details of individual charts and more on my StockTwits feed and on chartly.)
Gold Daily
Gold Weekly
Gold continued its rise this week but could not break through the resistance at 1366 on the daily chart, now intersecting with the rising 100 day Simple Moving Average (SMA). The Relative Strength Index (RSI) broke through into bullish territory but is now retesting the mid line from above. And the Moving Average Convergence Divergence (MACD) indicator, although positive, looks to be starting to roll lower. The daily chart suggests a move lower perhaps to retest support at the long term trend line, currently at 1326. The weekly chart shows a short trend higher being capped by the 20 week SMA, with 1376 as resistance above that. The MACD is still negative but starting to improve. The RSI on the weekly tested the mid line and is moving higher again. This chart suggests a move sideways then turning up. Put the tow together and look for a short term move lower but probably within the bullish rising channel and trendline before a turn back higher.
West Texas Intermediate Crude Daily
West Texas Intermediate Crude Weekly
Crude Oil started off moving lower and held support near the 88.50 line before crashing Friday down to the previous low near 85.50. The RSI is pointing lower and the MACD is increasing to the downside suggesting that the daily chart still has more downside. The expanding Bollinger bands during the move lower concur. the next level of support on the daily chart comes at 84 from October. The weekly chart is not any better, with the price falling out of the consolidation channel between 88.50 and 93. Notice that the RSI has broken through its rising trend and is now testing the mid line but at a very steep angle and that the MACD has crossed lower and is becoming negative. Support on this chart comes at 84 and then 81 near the 50 and 200 week SMA’s. Expect it to continue to fall and test these levels.
US Dollar Index Daily
US Dollar Index Weekly
The US Dollar Index continued its move higher this week ending the week touching the 100 day SMA and the 78.65 Fibonacci level on the daily chart before pulling back. The RSI is testing the mid line but the slope is falling as it does so. The MACD is crossed up and is growing more positive. The daily chart suggests more upside and if through the previous indicated levels, a move to 79. The weekly chart confirmed the Hammer from last week and tested the 20 week SMA. The RSI is curling higher but still below the mid line. The MACD has flattened. Putting together the full picture suggests the US Dollar Index to be headed higher and if through 79 has resistance at 79.50 and then 80.28.
iShares Barclays 20+ Yr Treasury Bond Fund Daily
iShares Barclays 20+ Yr Treasury Bond Fund Weekly
Treasuries had another consolidation week but at lower levels. From our proxy, TLT, the downtrend channel is still intact. The RSI has been in bearish territory since the fall began. The MACD looks to be improving and might cross higher but that downtrend line at 90 has been tested and held many times already. This looks lower from the daily chart with possibly support at the 88.60 or 87.47 level. The weekly chart also shows the down trend. It also highlights the intersection at the 88.60 level of the previous support several times through 2009 and 2010, and the rising 8 year trend line. The RSI has just started higher off of the oversold area and the MACD seems to be slowly improving. Where the daily chart shows little upside hope the weekly gives hope for a reversal. This could be confirmed on a move through the 90.44 level and up towards 92.08, the 100 week SMA. Failing that 85 is the next support level. This with the trend lower until it proves wrong.
Shanghai Stock Exchange Composite Daily
Shanghai Stock Exchange Composite Weekly
The Shanghai Composite came back from celebrating the year of the Rabbit and hopped higher. In doing so the RSI moved up from the mid line and the MACD continued to improve. If it can get through the 100 day SMA then the next resistance comes at 2965. The weekly chart has been in a long symmetrical triangle and is getting very close to the apex. This week moved it back above the 38.2% retracement of the down move and it now looks to test the top rail of the triangle at 2910. The RSI is moving higher off of the mid line and the MACD is rather flat but starting to cross higher. Look for a continuation higher in the coming week.
iShares MSCI Emerging Markets Index Daily
iShares MSCI Emerging Markets Index Weekly
Emerging Markets, as proxied by EEM, had a rough week but roared back on Friday toward resistance at 46. The RSI is pointing higher but the MACD has not turned yet. The move Friday brought it back within the Bollinger bands on strong volume. If it can continue higher through 46 then there is resistance at all the SMA’s higher before 47.40. If it fails then support comes at 44.20 lower. Note that the short term trend is down. The weekly chart shows the consolidation continuing above the channel break out, with Bollinger bands tightening. The RSI has held above 50 in bullish territory, but the MACD is turning lower. There is support below at the 43.40 area on the weekly chart. Watch the daily chart for direction but anticipate that the move Friday will carry over into next week.
VIX Daily
VIX Weekly
The Volatility Index consolidated along support near 15.50 all week. The falling SMA’s and RSI, and MACD becoming more negative, suggest that will continue or possibly push through lower. The weekly chart shows that consolidation as a small bodied candle with relatively long shadows indicating indecision. Should it move back higher there is resistance at 18 and then 20 before the longer term resistance at 21.25. The trend suggest that it will continue to consolidate or break through lower. If lower it may find support at 12.40 or 10.
SPY Daily
SPY Weekly
The SPY broke through resistance from 2007 and 2008 on Monday, consolidated and then moved higher on Friday. The increasing MACD and rising RSI suggest it has more room to move higher and the next resistance looks to be at 134.12. The weekly chart shows the strong trend higher, virtually uninterrupted since November. The MACD is increasing and the RSI is rising suggesting it has more upside. The one caution continues to be that the rise has happened with decreasing volume. Support is very close by though at 130 if there were to be a pullback. But at the end of the day it is price that pays and the trend looks to continue higher next week.
IWM Daily
IWM Weekly
IWM jumped up resistance at 81.57 Monday and consolidated just under it all week until breaking through higher on Friday. The RSI is rising and not in the overbought territory yet. The MACD is increasing as well. These suggest that there is more upside to come. The weekly chart shows a push through that full retracement of the down move. The RSI has reversed and is heading higher again now. The MACD did not cross down but kissed and moved higher again. The volume here seems to be stabilizing but has been lower on the run up as well. The next level of resistance comes at 84 and expect it to head towards it next week.
QQQQ Daily
QQQQ Weekly
QQQQ had the same pattern of moving higher Monday, consolidating through out the week and then higher again on Friday. The RSI is rising and pointing up, just reaching the overbought condition. The MACD is also increasing, suggesting that the move higher will continue. The next level of resistance will come at 60. The weekly chart shows a jump higher with an RSI that is just becoming overbought, and a MACD that is positive and starting to improve again. The next resistance on the weekly chart is at 61.08 and expect the QQQQ to head higher towards that area next week.
So next week looks to bring a continuation of the bull market for US and Chinese equities and continued low volatility. Emerging markets will give a clue early in the week whether they can break the down trend. The US Dollar Index should continue higher with US Treasuries continuing lower. Gold may pullback again but looks higher longer term but Crude Oil looks to be heading lower. Use this information to help understand the trend and what might influence it as you plan for the coming week and trade’m well.
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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)