Macro Week in Review/Preview March 25, 2011

Last week’s review of the macro market indicators looked for Gold, Crude Oil and US Treasuries to move higher, with the US Dollar Index continuing lower. The Shanghai Composite and Emerging Markets appeared to need more time to consolidate with China biased higher and Emerging markets lower. The Volatility Index looked to continue higher and make for an environment where US Equity ETF’s, SPY, IWM and QQQQ, to continue lower for the week if not right from Monday.

The week started out as foreseen for Gold, Crude Oil and the US Dollar Index. US Treasuries however moved sideways with a slight downward bias. The Shanghai Composite drifted higher out of its and Emerging Markets found a bid moving higher right out of the box Monday. Volatility settled in lower allowing stocks to find their footing by mid week and bounce back to levels from two weeks ago. A few surprises but that is what the market is all about. What does this mean for the coming 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,$GC_F

Gold Weekly,$GC_F

Gold jumped back above the 20 day Simple Moving Average (SMA) this week and held on after printing a new high on Thursday at 1447.30. There has now been a higher low and a higher high on the daily chart confirming the uptrend is still in tact, as the rising SMA’s show. The Relative Strength Index (RSI) on the daily chart is bullish but moving toward the mid line and on the weekly chart moving higher. The Moving Average Convergence Divergence (MACD) indicator on the daily chart and weekly chart gives not insight as it is flat in both. The weekly chart confirms the trend remains higher but with a string of small body and doji candles near 1445 resistance. 1381 is now support on the weekly chart if it falls through the 1411 and 1400 levels from the daily chart, and 1480 followed by 1500 are resistance higher. Look for the trend to continue higher next week within these bands.

West Texas Intermediate Crude Daily,$CL_F

West Texas Intermediate Crude Weekly,$CL_F

Crude Oil launched another assault at the 104.82 support/resistance line this week ending right near it and over the 20 day SMA. This also moved up from a higher base and if it can make new highs will confirm a short term trend up, within the longer rising trend. The MACD on the daily chart is improving on this run as the weekly chart is growing more positive. The RSI on both charts is bullish but falling slightly on the daily chart while rising on the weekly chart. The weekly chart shows the Bollinger bands expanding to allow a further move higher over the rising trend line. Through the Fibonacci level, the next resistance area is at 107 to 109 and then 116. Support remains firm at 100 and additionally at 102 on the daily chart. Look for Oil to continue higher.

US Dollar Index Daily,$DX_F

US Dollar Index Weekly,$DX_F

The US Dollar Index started the week lower but then found a floor and rose off of a Hammer reversal candle, finishing the week higher. All the SMA’s slope lower and the MACD is still flat on the daily chart and growing more negative on the weekly chart. The RSI remains in bearish territory but the rise on the daily chart suggest there may be more upside near term. The 3 year uptrend line which is now acting as resistance stands at 77.25 and it needs to get above that to change the short term trend. The Weekly chart shows a continued down trend with the next support at 74.80. Expect the downtrend to continue for the week with a chance of of some upside in the short term.

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

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

US Treasuries consolidated in their trend higher, finishing slightly lower. The support of the 100 day SMA and the previous resistance area at 92.28 held for the week. The RSI on the daily chart however is falling back towards the mid line and the MACD is crossing lower, suggesting some near term downside. The weekly chart shows the RSI glancing off of the mid line but the MACD increasing. The rising 8 year uptrend line at 89.10 provides great support lower if the Weekly and Daily SMA’s cannot. A break of that level would signal a reversal to a trend lower. Expect that next week Treasuries will remain above 90 and below the 94.50 to 95 area, with a short term bias lower.

Shanghai Stock Exchange Composite Daily,$SSEC

Shanghai Stock Exchange Composite Weekly,$SSEC

The Shanghai Composite moved back higher this week off of a higher low. The daily chart shows resistance now at 3000 and then 3150. The RSI on both the daily and weekly charts is pointing the way higher, and the MACD is positive on the weekly chart and crossing bullishly on the daily chart. The weekly chart shows the test and hold over support of the downtrend line of the symmetrical triangle now heading toward the 3050 Fibonacci level. Expect this to continue higher next week.

iShares MSCI Emerging Markets Index Daily,$EEM

iShares MSCI Emerging Markets Index Weekly,$EEM

Emerging Markets showed renewed strength this week moving higher and closing just outside of the broad channel. The bad news is that the EEM printed a doji star, potential reversal candle, Friday on the daily chart. The RSI and the MACD on the daily chart suggest there is more upside, but the volume on this last run has been falling off, making it suspect and adding weight to the doji. The weekly chart puts it all in perspective. Still in the channel between 44.20 and 48.40 that it has been in since October 2010. look for it to continue in the channel next week with the bias to the upside from the positive reinforcement of the bullish RSI on the weekly chart.

VIX Daily,$VIX

VIX Weekly,$VIX

The Volatility Index on the daily chart gapped below the rising trendline of the previous 3 weeks and continued down throughout the week. It printed a bullish Hammer reversal candle on Friday though near support at 18. The RSI and MACD on the daily chart suggest the move lower is not done yet, and those indicators on the weekly chart concur. Look for the VIX to head lower next week with support at 15.67 on the weekly chart and 15.50 on the daily chart. Any upside move should be capped near the 21.25 previous support and the 20 and 200 day SMA’s.

SPY Daily,$SPY

SPY Weekly,$SPY

The SPY continued higher this week after breaking through resistance of the 20 and 50 day SMA’s. It finished with a doji star Friday just below the support resistance line at 131.46, creating some uncertainty for the coming week. Both the RSI and MACD on the daily chart suggest it will continue higher, but the volume is diverging suggesting some weakness and the 20 day SMA has just crossed down through the 50 day SMA. The weekly chart has some conflicting indicators as well, with the RSI bouncing higher and the MACD crossing bearishly. Look for the trend to continue higher through 131.46 and towards resistance at 133 and then 134.11, but be mindful of the doji and support at 130 below. If it cannot get through 131.46 Monday and ends lower then it would signal a second lower high and continuation of the daily trend from the February high lower, with major support below 130 at 129 and then 127.

IWM Daily,$IWM

IWM Weekly,$IWM

The IWM broke above the 20 and 50 day SMA’s this week finishing above the support/resistance level of 81.57, making a higher high before printing a shooting star, potential reversal candle Friday. Both the RSI and MACD on the daily chart suggest it will continue higher next week though. The RSI on the weekly chart concurs but the MACD has crossed lower and is becoming more negative. Look for the recent trend to continue higher next week with resistance at 83 then 84. The shooting star requires an eye kept on the 81.57 level and a break below to support near 80.

QQQ Daily,$QQQ

QQQ Weekly,$QQQ

The leaner and meaner QQQ broke above the 20 and 100 day SMA’s this week finishing at the 50 day SMA at 56.84, but printing a doji/shooting star, potential reversal candle Friday. Both the RSI and MACD on the daily chart suggest it will continue higher next week though. The RSI on the weekly chart concurs but the MACD has crossed lower and is becoming more negative. Look for the recent trend to continue higher next week with resistance at 58 and then 58.87. If the doji star is confirmed then there is support at the 20 and 100 day SMA’s and the 20 week SMA before strong support at 54.26. Note that this would mean a second lower high and a reversal of expectation to creating a lower low below that support at 54.26.

So next week looks to bring better prices for both Gold and Crude Oil, and continuing devaluation of the US Dollar Index but with the potential for it to start the week higher. US Treasuries appear to be consolidating with a bias lower. The Shanghai Composite and Emerging Markets are both biased higher, but with the expectation of a continued consolidation on the Emerging Markets side. The Volatility Index looks biased lower, with tight upside risk, and will allow for the SPY, IWM and QQQ to continue higher, with all three mindful of a lower close Monday reversing this bias. Use this information as you prepare for the coming week and 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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