Macro Week in Review/Preview May 6, 2011

Last week’s review of the macro market indicators looked cautiously higher for both Gold and Crude Oil. The US Dollar Index looked to continue it death march lower searching for new all time lows while US Treasuries continue to favor the upside. The Shanghai Composite on support has more downside potential and the Emerging Markets look to be in a range, with a bias higher. Low and stable Volatility look to continue to support an environment for the Equity Index ETF’s, SPY, IWM and QQQ to move higher, with the SPY and IWM looking to have the best prospects in the short term.

That take played out well for about 10 minutes with Gold, Crude Oil, and the equity index ETF’s SPY, IWM and QQQ printing their highs for the week early Monday morning. The US Dollar Index also went briefly lower before rising. US Treasuries and foreign markets ignored this and continued as the technicals suggested. 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

The Relative Strength Index (RSI) took control of Gold and drove it lower from early Monday. It found support near 1475 the last minor consolidation level and then moved back higher on Friday. As it did so the RSI has bounced off of the mid line and is heading higher again, but the Moving Average Convergence Divergence (MACD) indicator is diverging, point lower. The weekly chart shows a bearish engulfing candle that took its RSI back below the overbought range and with a MACD that is starting to wane. Both charts show that the up trend remains solidly in tact. Although the daily chart is biased to the upside with resistance overhead at the 20 day Simple Moving Average (SMA) followed by the trendlines, it could still pullback further to the 1457 or 1434 and remain bullish. The weekly chart adds support at 1420 below at the intersection of the rising channel and the previous resistance/support area. Be ready for further downside if Gold gets below 1475 and upside over 1500.

West Texas Intermediate Crude Daily,$CL_F

West Texas Intermediate Crude Weekly,$CL_F

Crude Oil printed a long legged Doji on Monday that confirmed a reversal lower on Tuesday and then continued. As it ended the week printing a hammer on support of the 100 day SMA the damage may be over, but confirmation is needed. The RSI is tagging the technically oversold line so it may be ready to turn but the MACD looks to be increasing in the negative direction. It has also ended the last two days outside of the Bollinger bands. lots of sign of a snap back on the daily chart, but on the weekly chart the MACD is just crossing lower and the RSI is heading steeply down. Having broken through support of the trend line from late 2009 it now sits under the 20 week SMA as well. Look for Crude Oil to continue lower with support at 97 on the daily chart and then 93 on both charts. A move back over the trend line and holding there would reverse this call to bullish with resistance at 100 first and then 104.82.

US Dollar Index Daily,$DX_F

US Dollar Index Weekly,$DX_F

The US Dollar Index rallied hard off of consolidation at the 73 level and is now approaching the area where it will determine if it is a dead cat bounce or a reversal. The daily chart shows the layers of resistance at the 50 day SMA, the 75.60 low in November 2010, then the top Bollinger band and finally the 100 and 200 day SMA’s. Until it hits the 100 day SMA the downtrend is in tact. The upside looks promising as the RSI is rising sharply through the mid line and the MACD has crossed positive. The weekly chart shows a bullish engulfing candle for the week stalling near resistance at the 74.80 level from late 2009. It also looks positive with a rising RSI and a MACD that is improving. The overhead resistance on the weekly chart comes at 76 -76.40 and then the 20 week SMA near 77. Look for more upside for the Dollar Index next week.

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

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

US Treasuries, tracked by the TLT ETF, continued higher on the week and ended with a bullish looking pullback, a Hollow Red Candle, holding over support of the 200 day SMA and above the 94.98 Fibonacci level. With eh SMA’s turning higher and the volume increasing as it moves up expect the move higher to continue next week. The RSI though is into the technically overbought range with a crook down, but it could still move higher without being extended. The weekly chart shows it just below resistance at 96 but extending outside of the Bollinger bands. The RSI and MACD are both supporting more upside so look for a test of the 96 level or the 97.64 Fibonacci level on the daily chart.

Shanghai Stock Exchange Composite Daily,$SSEC

Shanghai Stock Exchange Composite Weekly,$SSEC

The Shanghai Composite continued its move lower off of the 3050 rejection a few weeks back. it now is at the bottom of the Bollinger bands on the daily chart with a RSI that is bouncing off of the 30 area and a MACD that is that is leveling. The weekly chart re-enforces the downside bias after moving through the 20 and 100 week SMA’s with a falling RSI and MACD cross lower. Support comes at the intersection of the rising trend line and the 38.2% Fibonacci level at 2785.75 and then the 200 day SMA at 2819 before 2700. Look for this to continue lower in the coming week.

iShares MSCI Emerging Markets Index Daily,$EEM

iShares MSCI Emerging Markets Index Weekly,$EEM

Emerging Markets, as proxied by the EEM ETF, rejected at the 50.17 support/resistance level again, and move lower through the week. But it found support at the previous level of 47.20 and the bottom Bollinger band and bounced higher. Perhaps a new range between 47.20 and 50.17 is forming? The MACD is leveling on the daily chart and the RSI has turned higher so the resistance to the upside at 48.78 could be breached again. The weekly chart looks more bearish with a big red candle that encompasses all of the previous 4 weeks. The RSI looks sharply down and the MACD is waning as it sits just below the 48.40 level. Look for more downside but with support at the 47.20 level on the daily chart and the 44.40 level on the weekly is it loses that.

VIX Daily,$VIX

VIX Weekly,$VIX

The Volatility Index rose sharply on the week but remains at relatively tame levels. The daily chart shows a RSI that points to rising volatility as it moved through the mid line and the MACD is increasing. The 200 day SMA is the next resistance at 19.80 and has been a constraint historically. The weekly chart shows a rise off of consolidation at 15.50-15.67. It has a RSI that is rising but right at the mid line and a MACD that is flat but crossing higher. This looks to stay relatively stable with upside risk to 21-22 area and then 27 on a strong move higher, but that is not indicated. Expect it to remain between 15.50 and 22.

SPY Daily,$SPY

SPY Weekly,$SPY

The SPY hit its high on Monday early and sold through Thursday before gapping up and closing higher Friday, although with a bearish Solid Black Candle. The daily chart shows confusing signals with a RSI that is bouncing off of the mid line and a MACD that is crossing negative. It also found support at the 20 day SMA and is over the 134.11 Fibonacci and previous resistance level, after printing a series of higher highs and higher lows. Adding to the confusion the weekly chart printed a bearish engulfing candle with a falling RSI and MACD that is crossing lower, but held the previous high. The daily chart is mixed and the weekly chart shows a downside bias. Normally the weekly chart would prevail so look for a test of the 20 week SMA at 130.65 but with support at 131.46 along the way. Should it continue higher next week then resistance comes at 136.14 and then the previous high. Above that and expect buyers to flood in.

IWM Daily,$IWM

IWM Weekly,$IWM

The IWM hit its high also Monday early and sold through Thursday before gapping up and closing higher Friday, although with a bearish Solid Black Candle. The daily chart shows confusing signals with a RSI that is turning higher and a MACD that has crossed negative. It found support at the 50 day SMA but rejected on an attempt to get through the 20 day SMA after printing a series of higher highs and higher lows. Adding to the confusion the weekly chart printed a bearish engulfing candle with a falling RSI and MACD that is crossing lower. The daily chart is mixed and the weekly chart shows a downside bias here as well. Following the weekly chart look for a test of the 20 week SMA at 81.32 near the support at 81.45 along the way. Should it continue higher next week then resistance comes at 86 and then the previous high. Above that and expect buyers to flood in.

QQQ Daily,$QQQ

QQQ Weekly,$QQQ

The QQQ hit its high Monday early and sold through Thursday before gapping up and closing higher Friday, although with a bearish Solid Black Candle, surprise, surprise. The daily chart shows confusing signals with a RSI that is turning higher and a MACD that is crossing negative. It found support at previous resistance just over 58 after printing a series of higher highs and higher lows. Adding to the confusion the weekly chart printed a bearish engulfing candle with a falling RSI but here the MACD is improving. The daily chart is mixed and the weekly chart shows a potential bull flag. Following the weekly chart look for support at 58 or the 20 week SMA lower before it can continue higher next week with resistance at 58.87 and then 59.70. Above that and expect buyers to flood in.

So next week looks for further downside if Gold gets below 1475 and upside over 1500. Also look for Crude Oil to continue lower with support at 97 but a move above 100 turning it bullish. The Dollar Index looks to continue higher next week along with US Treasuries. The Shanghai Composite looks to continue lower in the coming week along with Emerging Markets. Expect the Volatility Index to remain in a range between 15.50 and 22. The SPY and IWM look for more downside longer term with the QQQ more bullish. All of the Equity Index ETF’s will trigger buys on moves to new highs though after printing a series of higher highs an higher lows. 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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