Macro Week in Review/Preview March 23, 2018

• Posted by Greg Harmon
• on March 23rd, 2018

Last week’s review of the macro market indicators noted with March Options Expiration done and spring around the corner the Equity Index ETF’s looked mixed but positive. Elsewhere looked for Gold to consolidate with a downward bias while Crude Oil consolidated in a tight range. The US Dollar Index was also consolidating in a downtrend, trying hard to reverse it, while US Treasuries were showing signs of a potential reversal to the upside.

The Shanghai Composite and Emerging Markets continued to consolidate, the former around long term support and resistance, and the latter at the highs. Volatility looked to continue to drift lower easing the pressure on the equity markets. Their charts all showed retrenchment in the short term, with the IWM trying to reverse and lead them all higher. On the longer picture the IWM and QQQ looked strong with the SPY stuck in broad consolidation.

The week played out with Gold moving sideways, but that lasted just 2 days before a strong move higher, while Crude Oil also broke its consolidation to the upside. The US Dollar was the exception, continuing to consolidate while Treasuries moved lower early in the week before reversing back up. The Shanghai Composite held steady until Friday when it dumped lower while Emerging Markets headed lower.

Volatility picked up and continued to rise through the week, putting pressure on equities. The Equity Index ETF’s all moved lower on the week, with the QQQ leading to the downside. The SPY and QQQ took out their March lows while the IWM held above. What does this mean for the coming week? Lets look at some charts.

Gold Daily, $GC_F

Gold Weekly, $GC_F

Gold came into the week at support and settled there early. Wednesday it made a push higher only to pullback. But that was a sample of what was to come as it rose the rest of the week. Friday finished with a strong move to end at the high and push the Bollinger Bands® on the daily chart open. The RSI is also moving up into the bullish zone with the MACD crossed and rising.

The weekly chart shows Gold back at resistance that has stalled it since last summer. The RSI on this timeframe is rising again in the bullish zone with the MACD flat. There is resistance above here at 1370 and 1400 then 1415. Support below is at 1315 and 1300 then 1278. Upward Bias in Consolidation.

West Texas Intermediate Crude Daily, $CL_F

West Texas Intermediate Crude Weekly, $CL_F

Crude Oil entered the week pressing against the 50 day SMA and the top of a descending triangle. It consolidated in a small body candle Monday but then broke to the upside Tuesday. By Wednesday it was making a higher high and finished at the high of the week Friday, and back at the January high. The daily chart shows the RSI bullish and rising with the MACD moving higher.

On the weekly frame the the move higher follows a 5 week consolidation over the rising channel and starts a new leg higher. The RSI is rising and bullish with the MACD crossing up and positive. There is resistance at 66.50 and 69.50 then 75. Support lower comes at 65 and 62.50 followed by 60 and 59. Continued Uptrend.

US Dollar Index Daily, $DX_F

US Dollar Index Weekly, $DX_F

The US Dollar Index was the most boring player this week. It came into the week consolidating in a tight rage after a long drop. And it left the week in the same situation, slightly lower. The daily chart shows a range of just over 1 point on the week with the RSI sitting just below the mid line and the MACD moving slightly lower and negative.

The weekly timeframe shows it sitting at the 61.8% retracement of the move higher in 2014 with the RSI falling back and the MACD stalling and kissing the signal line, not crossing it. There is support below at 88.50 and 87.25 then 86.80. Resistance above comes at 91.40 and 92 then 93 and 94. Continued Consolidation in the Downtrend.

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

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

US Treasuries were rounding out of a bottom as they entered the week, but moving lower. They continued to the downside the first half of the week, finding support at the 20 day SMA and bounced. The bounce stalled at the 50 day SMA and resistance and held there the rest of the week. The daily chart has a RSI trending higher with the MACD crossing to positive as it moves up.

The longer timeframe shows a clear move off of the bottom. The RSI in this chart is rising but still below the mid line with the MACD turning towards a cross up. There is resistance here and above at 122 and 123.25 then 124.25. Support lower comes at 118.20 and 116.20 followed by 115.25 then 113.20. Upward Bias.

Shanghai Stock Exchange Composite Daily, $SSEC

Shanghai Stock Exchange Composite Weekly, $SSEC

The Shanghai Composite came into the week consolidating a bounce off of a major retracement. it held steady at the 20 day SMA and just under the 200 day SMA all week until gapping down over 3% Friday. It settled there, at the February low, with the RSI deep in bearish territory and the MACD crossed down and falling on the daily chart.

The weekly chart shows a push back to a second touch at the 200 week SMA and under the long term support resistance zone. The RSI is falling back after failing at the mid line while the MACD falls. There is support lower at 3100 and 3000. Resistance above here comes at 3280 and 3360 followed by 3420. Broad Consolidation with a Downward Bias.

iShares MSCI Emerging Markets Index Daily, $EEM

iShares MSCI Emerging Markets Index Weekly, $EEM

Emerging Markets were marking time just below the high as they entered the week. They stayed in a tight range the early part of the week, around the 20 and 50 day SMA’s. Thursday they gapped lower and followed through with a stronger move down Friday. This left them at a retest of the support/resistance area in play since October. The daily chart shows the RSI in the bearish zone and falling with the MACD crossed down and moving lower.

The longer picture shows the pullback remains over the long term support and near the 20 week SMA. The RSI is at the mid line with the MACD crossing down but positive. There is support at 46 and 45 then 44 and 42.25. Resistance above comes at 48 and 50 then 51.75 and 53.40. Downward Bias in Broad Consolidation.

VIX Daily, $VIX

VIX Weekly, $VIX

The Volatility Index was drifting lower as it entered the week. Monday saw a push higher fail and fall back and then it settled Tuesday and Wednesday. Thursday it jumped again and held with follow through to the upside Friday. It ended the week outside of the Bollinger Bands® and at the top from earlier in the month. It generally does not like to stay outside of the Bollinger Bands for very long. The daily chart shows the RSI rising again and the MACD crossed up and rising.

The weekly chart shows a jump to the top of the Bollinger Bands on a strong candle higher. The RSI is back over 60 with the MACD making new 2 and 1/2 year highs. There is resistance at 26 and 31 then 38. Support lower comes at 22 and 18 then 15.67 and 12.40. Elevated Volatility.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY had pulled back from a higher high and filled a gap, with progressively smaller candles as it entered the week. It was at the 20 day SMA and seemed to be settling. But that was not the case. It gapped down Monday and then moved lower. Tuesday and Wednesday saw smaller inside candles holding at support. But then Thursday it gapped down under the 100 day SMA and drove lower. Friday continued the move down leading to the 200 day SMA.

The second touch at the 200 day SMA in 2 months came on a bearish Marubozu candle, but one that is well outside of the Bollinger Bands®. The daily chart shows the RSI on the verge of moving into oversold territory with the MACD negative and falling. The volume on this leg lower is increasing, but far less than on the February move down. The short term chart carries a negative bias, but with a possible short term bounce from the oversold conditions.

The weekly chart still has room to the lower Bollinger Band, sitting just below the 50 week SMA. The RSI is making a lower low and crossing the mid line as the MACD is continuing lower, but still positive. It was a bearish Marubozu candle on the week, suggesting more downside, and frankly this timeframe looks worse than the daily one. There is support lower at 257 and 255 followed by 253.50 and 250 before 248.50. Resistance above comes at 260 and 262.50 then 265 and 267 before 269 and 272.50. Short Term Downtrend.

IWM Daily, $IWM

IWM Weekly, $IWM

The IWM started the week moving sideways after a quick touch at the 20 day SMA Monday. But it also dropped hard Thursday and continued down Friday. It crossed the 100 day SMA, but did not break below the February low. The daily chart shows the RSI falling into the bearish zone with the MACD falling. The Bollinger Bands are opening lower on this chart.

The weekly chart remains above the long term channel break out but also printed a Marubozu candle. The RSI is crossing the mid line as the MACD is continuing lower, but positive. There is support lower at 150 and 148 followed by 146 and 144 then 142.50. Resistance above comes at 151.50 and 153 then 154 and 156 before 158.50. Short Term Downtrend.

QQQ Daily, $QQQ

QQQ Weekly, $QQQ

The QQQ was more like the SPY, as it seemed to be settling near the highs. But it gapped down Monday and ran to the 50 day SMA. Tuesday and Wednesday saw smaller inside candles holding at support. But then Thursday it gapped down again and continued lower Friday through the 100 day SMA and well outside of the Bollinger Bands®. The daily chart shows the RSI close to oversold territory with the MACD negative and falling.

The weekly chart shows the pullback to the 20 week SMA. The RSI is making a lower low and crossing the mid line as the MACD is continuing lower, but positive. There is support lower at 156.50 and 155.50 then 153 and 152 before 149.50 and a gap to 147.70. Resistance above comes at 161.50 and 163 then 164.25 and 166.50 followed by 167.50 and 169.25. Short Term Downtrend.

With another Fed rate hike behind it and now the prospect of trade wars, the equity markets finished the week breaking down and looking weak. Elsewhere look for Gold to continue in its uptrend while Crude Oil also moves higher. The US Dollar Index seems content to move sideways while US Treasuries are biased to continue to the upside. The Shanghai Composite and Emerging Markets are biased to the downside within broad consolidation.

Volatility looks to remain elevated keeping the bias lower for the equity index ETF’s SPY, IWM and QQQ. Their charts show short term weakness continuing and for the first time in years the prospect of intermediate term weakness in the SPY and IWM. The QQQ remains the best chart on the longer timeframe. Use this information as you prepare for the coming week and trad’em well.

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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