Macro Week in Review/Preview April 22, 2011

Last week’s review of the macro market indicators looked for Gold and Crude Oil to continue higher with the possibility of further consolidation first for Oil. The US Dollar Index looked to continue lower while US Treasuries test resistance higher. The Shanghai Composite may pause before moving higher and the Emerging Markets were in a range. Low and subdued Volatility would continue to create a good environment for the equity indexes SPY, IWM and QQQ. Both the SPY and IWM looked to be heading higher but the QQQ may need further consolidation.

The week went very much according to what the technicals suggested. Gold and US Treasuries went higher right from the start. Crude Oil and the US Dollar Index hiccuped in the reverse direction Monday with the S&P warning, but then resumed their moves. The same happened to the Index ETF’s taking a haircut early but then moving higher. What does this action mean for the coming wee? 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 broke higher Monday and never looked back continuing last weeks move. On the daily chart the Relative Strength Index (RSI) is still rising and the Moving Average Convergence Divergence (MACD) indicator is slowly increasing. As it moves higher the Simple Moving Averages (SMA) are gaining slope and the Bollinger bands (BB) are moving higher. It is now approaching the 3yr trend line resistance at 1529. The weekly chart remains very bullish. With a rising RSI and MACD and expanding BB’s as the price rises to the intermediate resistance at 1550 and 1600 above that. There is nothing in these charts to suggest that Gold is going anywhere but higher.

West Texas Intermediate Crude Daily,$CL_F

West Texas Intermediate Crude Weekly,$CL_F

Crude Oil started lower but recovered at the end of the week, closing above resistance, now support, at 110. The rising 20 day SMA has been a key support to the move higher over the last 2 months. On the daily chart all of the SMA’s are pointing higher and the MACD is improving as the RSI moves sideways in bullish territory. The weekly chart is a whole lot more bullish. With the SMA’s sloping higher, the RSI trending higher and the MACD positive as it rises with rising BB’s. The 104.82 Fibonacci level is proving strong support as it consolidates below resistance at 113.50. Look for Crude Oil to consolidate early but move higher into the week.

US Dollar Index Daily,$DX_F

US Dollar Index Weekly,$DX_F

The US Dollar Index is near a death plunge on the edge of a cliff. After poking above the downtrend on the daily chart it was whack-a-mole’d lower under the November 2009 low. All of the SMA’s are sloping down on both the daily and weekly chart. The RSI is testing the technically oversold level on both charts but has a lot of room to go before it gets excessive. The MACD is flat on the daily chart but growing more negative on the weekly chart. Finally the BB’s are expanding as it moves lower on the daily chart and still have room on the weekly chart. The only hope is the Doji print Friday. If this was not ugly enough, note that if it breaches the 71.50 support level on the weekly chart and low of 71 on the daily chart then it will be at levels not seen in over 40 years and maybe never. And the kicker, the target for the red Head and Shoulders pattern on the weekly chart would then be 59.80. Enough said, it looks lower.

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

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

US Treasuries are trying to extend a move higher after waving a bull flag this week. The technicals are mixed with the daily chart showing a mainly flat SMA’s, an RSI that is oscillating around the mid line, and a MACD that is increasing slightly. The weekly chart has an increasing MACD with an RSI that is retesting the mid line. The BB on the weekly chart are getting very tight. With a slight bias to the upside, look for the TLT to continue to drift a bit.

Shanghai Stock Exchange Composite Daily,$SSEC

Shanghai Stock Exchange Composite Weekly,$SSEC

The Shanghai Composite held its ground higher but could not break through resistance. But the daily chart shows that the SMA’s are sloping up and the RSI has held on another test of the mid line. The weekly chart shows that the Fibonacci level at 3050 is the culprit of the resistance where it is consolidating. The weekly RSI is rolling lower and the MACD is fairly flat, suggesting more consolidation next week. If it should break higher then the next resistance is at 3150, and any pullback will see support at the SMA’s. A slight upward bias.

iShares MSCI Emerging Markets Index Daily,$EEM

iShares MSCI Emerging Markets Index Weekly,$EEM

Emerging Markets, as measured by the EEM ETF, found support early and moved higher this week back to resistance. The rising RSI on the daily chart and the MACD crossing positive support further upside. On the weekly chart the bullish candle stick printed shows a retest of support at 48.40 holding before moving higher. Now the weekly RSI and MACD are also supporting more upside. If it can get above 50.17 then look for next week to be a test of the 52 level on the way higher, otherwise look for consolidation.

VIX Daily,$VIX

VIX Weekly,$VIX

The Volatility Index popped Monday early then fell much lower all week closing at levels not seen since 2007. The prognosis is lower still. The RSI and MACD on the daily chart point lower and the SMA’s are sloping or rolling lower. On the weekly chart the same story is told. The RSI is moving lower and the the MACD is about to cross down as it passes through support at 15.67. Look for continued subdued volatility in the coming week as the Index approaches the actual shrinking realized volatility.

SPY Daily,$SPY

SPY Weekly,$SPY

The SPY started the week with a reversal Hammer Doji and finished with a potential reversal Hanging Man Doji. It was a strong week but with very little daily range and most of the moves happening overnight. The daily chart shows rising SMA’ s and RSI and an MACD that is crossing higher. It is just below resistance of the previous high and that of late 2007. The weekly chart printed a bullish engulfing candle. The RSI is moving higher but the MACD is crossing lower, although fairly flat. Look for a bias to the upside next week and if it holds above 134.11 then another leg higher, but with a confirmation of the Hanging Man lower on Monday, then more of the consolidation with support at 131.46.

IWM Daily,$IWM

IWM Weekly,$IWM

The IWM also started the week with a reversal Hammer Doji and finished with a potential reversal Hanging Man Doji. It also had very little daily range with most of the moves happening overnight. The daily chart shows rising SMA’ s and RSI and an MACD that is about to cross higher. It has some room to the previous highs as resistance. The weekly chart printed a bullish engulfing candle. The RSI is holding in bullish territory but the MACD is fairly flat. Look for a bias to the upside next week towards the high of 85.88 and beyond, but with a confirmation of the Hanging Man lower on Monday, then more of the consolidation with support at 81.57.

QQQ Daily,$QQQ

QQQ Weekly,$QQQ

The QQQ also started the week with a reversal Hammer Doji and finished with a potential reversal Evening Star, and outside of the upper BB. It also had very little daily range with most of the moves happening overnight. The daily chart shows rising SMA’ s and RSI and an MACD that is increasing. The weekly chart printed a big bullish engulfing candle. The RSI is moving higher in bullish territory and the MACD is improving. Look for a sideways start and then more upside next week with 58.87 and then 60 as targets higher, but with a confirmation of the Evening Star lower on Monday, then more of the consolidation with support at 55.50 and then 54.26.

So next week looks like higher prices for Gold and a bias higher for Crude Oil and US Treasuries. The US Dollar Index looks to continue its death march lower with the Shanghai Composite and Emerging markets moving to the upside. Continued subdued volatility will be supportive to more upside for the equity index ETF’s, SPY, IWM and QQQ, but being mindful that all three printed potentially bearish reversal candles on Thursday. Continued caution on the long side. Use this information to understand the major trend and how it may be influenced as you prepare for the coming week ahead. 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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