Macro Week in Review/Preview March 11, 2011

Last week’s review of the macro market indicators looked for the short term to bring new highs for Gold and Oil, with a chance of consolidation within the coming week. The US Dollar Index looks to be headed lower with US Treasuries fate determined by the 20 and 50 day Simple Moving Average’s (SMA’s). Chinese and Emerging markets look better bid. The Volatility Index appears to be drifting higher with a broader range creating some uncertainty with the broad market Equity ETF’s. The SPY, IWM and QQQQ all look like they have more consolidation in store for them for the week with a bias to the downside, although within the context of a continued strong uptrend

The week began with both Gold and Oil moving to new highs only to fall back the rest of the week. The US Dollar Index found a low Monday and moved higher before falling back Friday and US Treasuries found support before moving higher through. The Chinese market tested higher levels before falling back and the Emerging markets drifted above their recent downtrend. The Volatility Index behaved as expected, drifting higher, but US Equity ETF’s trended lower on the week. How does this impact the view for next week? Let’s look at some charts.

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

Gold Daily

Gold Weekly

Gold made a new high first thing Monday morning and then fell lower all week before a bounce on Friday, holding over the 20 day SMA, the center of the Bollinger bands, and previous support at 1411. The prognosis from the daily chart is not good though. The Relative Strength Index (RSI) is trending towards the mid line and bearish territory and the Moving Average Convergence Divergence (MACD) indicator is crossing bearishly as it turns negative. The weekly chart is more positive. Gold printed a candle within the previous candle, continuing the uptrend. It has a MACD that is about to cross bullishly on the weekly chart, but the RSI has just turned down. Where the daily chart suggests that there may be further consolidation or downside. The weekly suggests that the trend higher will continue, and with the tight Bollinger bands the move might be very soon. Look for the limit to the downside to be the area where the 50 and 100 day SMA are converging to the rising trend line near 1376, and then upside resistance at 1450 before 1490.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly

Crude Oil also made its high early on Monday and retreated the rest of the week. It has worked off of overbought RSI condition on the daily chart but the MACD looks ready to cross bearishly within a couple of days and has been declining. The SMA’s are all rising, with the short ones getting steeper, a bullish sign and the candle from Friday shows that despite a poor beginning the bulls took charge later in the day, creating the big shadow after testing support near 100. The weekly chart again is more bullish showing a print that remained above the trend line and near the Fibonacci level at 104.82. The weekly MACD is increasing and the RSI is firmly bullish. This combination also suggest that you prepare for a short term pullback or consolidation, probably not below 100 or the support area on the daily chart at 98, before it can move higher above the Fibonacci level to a resistance channel from 107 – 109.

US Dollar Index Daily

US Dollar Index Weekly

The US Dollar Index did the opposite of Gold and Oil, finding its bottom for the week early Monday before steadily moving higher, only to give much of the gain back Friday. During the week it breached the 3 year uptrend line at 77.10, but closed below it. On the daily chart the RSI flirted with the mid line but is moving lower. All the SMA’s are sloping down and the 20 day SMA smacked it back down on Friday. The weekly chart shows the prolonged downtrend continuing. The weekly MACD is growing more negative and the RSI is still firmly in bearish territory. Expect the Dollar to continue lower with support from the daily chart at 76.24 and then the November low at 75.60, before the support areas on the weekly chart at 74.80 and then 71.50. It may continue to consolidate first near the trend line at 77.13, but is headed lower unless it can get above 78.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly

US Treasuries, measured by the TLT, found support at the 20 day SAM and rose through the week, back to the previous resistance level near 92.28. The daily chart looks to be in consolidation mode, with the SMA’s converging and relatively flat, with the exception of the 100 day SMA. The weekly chart shows that consolidation in the last three candles, finding resistance at the 100 week SMA. The weekly chart looks bullish from three perspectives. The RSI is rising, the MACD is improving and about to cross bullishly and there is the rising 8 year trend line that it bounced off of 5 weeks ago. However, that rising RSI is about to test the mid line and it is below all of the shorter weekly SMA’s. Look for further consolidation within the range between 90 and 92.50, before it can move higher.

Shanghai Stock Exchange Composite Daily

Shanghai Stock Exchange Composite Weekly

The Shanghai Composite gapped up Monday above the previous resistance area and closed above the Bollinger bands. After moving slightly higher for a couple of days it retreated down toward the 20 day SMA. It is now back within the Bollinger bands and looking a bit weak on the daily chart. The RSI is fall and steeply sloped and the MACD is crossing lower and decreasing. There is a lot of support though with all the SMA’s just below. The weekly chart printed a shooting star after breaking above a symmetrical triangle last week. The shooting star is a bearish reversal if confirmed with a lower move next week. But the RSI is pointing higher, trying to help it up. Expect the Shanghai Composite to drift between the the SMA’s support on the daily chart and the 3050 Fibonacci level from the weekly chart with an upward bias from the slightly rising weekly SMA’s.

iShares MSCI Emerging Markets Index Daily

iShares MSCI Emerging Markets Index Weekly

Just when the Emerging Market ETF looks to show any discernible pattern it goes and breaks it. It did hold support above the downtrend line but is now giving a wide range consolidation between 44.10 and 48.78, with a couple of tighter channels within that range. The RSI and MACD on the daily chart continue to confound as well. Best to keep to the weekly chart for this as it is very clear. The weekly chart shows the consolidation range after breaking above the previous consolidation range. The RSI has remained bullish although skidding along the mid line, since April 2009. The Bollinger bands are squeezing suggesting it is ready for a move. If it gets above 48.4, then there is resistance at 50.20, and if the break is lower then support is at the previous break out level at 43.10. The trend and my bias are that the break out, when it comes, will be higher.

VIX Daily

VIX Weekly

The Volatility Index continued its drift higher making higher lows, but not exceeding the 200 day SMA as yet. The 200 day SMA has been resistance since September and if that continues it suggest a VIX move lower as the 200 day SMA turns down. This would show as a break below the dotted short term trend line. The weekly chart shows the three recent candles, that gapped above the previous lows, with long high shadows that ended near the 50 week SMA. This suggests weakness and a potential move lower. The falling 100 week SMA, might be the catalyst for this to occur. If it moves lower expect support at 20 and 18 before the stronger levels at 15.50-15.67. If these SMA’s do not contain the VIX then there is resistance higher at 24. Either way do not expect a wild move in the short run from what the charts tell.

SPY Daily

SPY Weekly

The SPY continued lower this week through the support/resistance level at 131.46 and finally found support Friday at the 129.50 level. The daily chart shows the RSI trending lower with a MACD that is continuing to grow more negative. The Bollinger bands are expanding as well, allowing for a move lower. The next level of support on the daily chart is at 128. The weekly chart also looks lower, with the strong move lower this week. The MACD on the weekly chart is crossing lower and the RSI is falling and steeply sloped. The next level of support lower under 128 on the weekly chart comes at the 20 week SMA at 126.30. Expect more downside to come next week. Keep in mind that this is still within the context of a strong up trend, and 126.30 would only be slightly over 6% off of the recent highs. 134.12 remains upside resistance for now.

IWM Daily

IWM Weekly

The IWM also moved lower this week through the support /resistance level at 81.57 before finding support just above the next support /resistance level at 79.10. It also has RSI trending lower with a MACD that is continuing to grow more negative. The Bollinger bands are expanding as well, allowing for a move lower. The weekly chart also looks lower, with the strong move lower this week. The MACD on the weekly chart is crossing lower and the RSI is falling and steeply sloped. The next level of support lower under 79.10 is at 77.70, the 20 week SMA. Expect more downside to come next week. This is also within the context of a strong up trend with resistance higher at 81.57.

QQQQ Daily

QQQQ Weekly

The QQQQ moved lower this week through the 50 day SMA at 56.92 before finding support on the bottom of the Bollinger bands and bouncing. It has one bright spot the others do not in that it printed a bullish engulfing candle Friday. It also has RSI trending lower with a MACD that is continuing to grow more negative. The Bollinger bands are expanding as well, allowing for a move lower. The weekly chart also looks lower, with the strong move lower this week. The MACD on the weekly chart is crossing lower and the RSI is falling and steeply sloped. The next level of support lower at 55.33, the 20 week SMA, before the support/resistance area at 54.26. Expect more downside to come next week. This is also within the context of a strong up trend with resistance higher at 58.50.

So next week looks like further consolidation for Gold Crude Oil and Treasuries, before they can all start to move higher. The US Dollar Index looks to continue lower. The Shanghai Composite and Emerging markets also look to consolidate further with a bias to the upside longer term. The Volatility Index is looking tired after testing higher and may push lower again, but not move much from where it is now. The equity ETF’s SPY, IWM and QQQQ all look set up to continue lower, despite finishing better on Friday. Use this information as you prepare for the coming week and trade’m well.

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