Macro Week in Review/Preview August 17, 2018

• Posted by Greg Harmon
• on August 17th, 2018

Last week’s review of the macro market indicators noted heading into August Options Expiration week, the equity markets continued to look strong on the longer timeframe, but might need a rest in the short run. Elsewhere looked for Gold to possibly pause in its downtrend while Crude Oil bounced at support after a pullback on the uptrend. The US Dollar Index was breaking out to the upside and looked strong while US Treasuries were bouncing in consolidation.

The Shanghai Composite might be ready to pause in its downtrend while Emerging Markets continued lower. Volatility looked to remain low but creeping up into the teens removing the aid it had been giving to equities. The equity index ETF’s SPY, IWM and QQQ, all looked strong on the weekly timeframe. But on the shorter charts the SPY might continue the short term pullback along with the QQQ while the IWM consolidates at the highs.

The week played out with Gold decidedly continuing lower under $1200 per ounce while Crude Oil could not hold its bounce and fell back. The US Dollar met resistance mid week and saw some profit taking while Treasuries pushed slightly higher in broad consolidation. The Shanghai Composite renewed its downtrend to finish at 30 month lows while Emerging Markets made new 52 week lows.

Volatility poked higher early in the week but then recoiled to end near unchanged, keeping the bias higher for equities. The Equity Index ETF’s reacted in mixed fashion again, with the SPY and IWM basically treading water all week until drifting up Friday while the QQQ moved slightly lower. What does this mean for the coming week? Lets look at some charts.

Gold Daily, $GC_F

Gold Weekly, $GC_F

Gold entered the week at support, just over 1200 and at the 61.8% retracement of the move higher from the December 2016 low. It quickly lost that support and started to head lower. By Friday it had touched a 20 month low and caught an oversold bounce. The daily chart shows the Bollinger Bands® have opened wide for the move down with the RSI oversold and the MACD negative and falling.

On the weekly chart the outlook is equally grim. The strong move lower was coupled with a RSI dipping into oversold territory and the MACD running negative. There is support below here at 1145 and 1125 then 1100 and 1060. Resistance stands at 1200 and 1215 then 1245 and 1265. Downtrend.

West Texas Intermediate Crude Daily, $CL_F

West Texas Intermediate Crude Weekly, $CL_F

Crude Oil was testing support at prior resistance as the week started. It continued to hold early in the week but then the Bollinger Bands opened and the price started moving lower fast Wednesday. It tagged the 200 day SMA Thursday for the first time in 10 months and found support, holding there Friday. The RSI on the daily chart continues to move lower in the bearish zone with the MACD negative and dropping.

The weekly chart shows a drop out of support and toward the 50 week SMA. The RSI on this timeframe is now dipping below the mid line with the MACD dropping. There is support at 65 and 62.50 then 60 and 58. Resistance above is at 66.50 and 69.50 then 71 and 72.80. Short Term Pullback.

US Dollar Index Daily, $DX_F

US Dollar Index Weekly, $DX_F

The US Dollar Index had just broken above 3 month resistance at the end of last week. It continued higher in the new week, peaking Wednesday with a Shooting Star candle. That confirmed lower Thursday and continued down Friday. The daily chart shows the RSI leveling as it hit overbought territory with the MACD rising and positive. The Bollinger Bands are open for a move higher.

The longer weekly chart is better to see the continuation to the upside. The RSI on this timeframe is strong and moving into overbought territory with the MACD rising and positive. There is resistance at 96.50 and 97.40 then 98.30 and 99. Support lower comes at 95 and 94 then 93 and 92. Possible Stall in Uptrend.

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

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

US Treasuries had moved up over short term resistance and the 100 day SMA as the week began. They held there for 2 days and then started to drift higher Wednesday. As this happened the Bollinger Bands are squeezing in and Treasuries ended the week at the top of the Bands. The RSI on the daily chart is leveling under 60 with the MACD rising and ending in positive territory.

On the weekly chart the move higher remains within the broad consolidation. The RSI on this timeframe is holding at the mid line with the MACD flat just under zero. There is resistance at 122 and 123.25 then 124.25 and 125.25. Support comes lower at 120.25 and 118.20 then 116.20 and 115.25. Updrift in Broad Consolidation.

Shanghai Stock Exchange Composite Daily, $SSEC

Shanghai Stock Exchange Composite Weekly, $SSEC

The Shanghai Composite was bouncing off of a retest at the July low and just under the 20 day SMA as the week started. It never got there. It held Monday and Tuesday then ripped lower Wednesday. Another move down Thursday was followed by a strong down day to end the week at a 30 month low. The RSI is falling and bearish with the MACD negative and dropping.

The longer weekly timeframe shows the continuation lower. The RSI is returning lower and bearish with the MACD falling and negative. There is support lower at 2650 and 2450 then 2335 and 2260. Resistance above comes at 2700 and 2800 then 2900 and 2940 before 3000. Downtrend.

iShares MSCI Emerging Markets Index Daily, $EEM

iShares MSCI Emerging Markets Index Weekly, $EEM

Emerging Markets had gapped down under the 20 day SMA at the end of last week with the Bollinger Bands opening. Monday saw another drop and consolidation Tuesday. Wednesday they dropped again, hitting more than 2 year lows before a small bounce to end the week. The daily chart shows the RSI bouncing off of an oversold touch with the MACD falling and negative.

The weekly chart shows a Hammer, a possible reversal, closing under the 100 week SMA for the first time since the start of 2017. The RSI on this timeframe is falling and bearish with the MACD negative and falling. There is support at 41 and 40 then 38.80 and 38 before 37.50. Resistance above this spot comes at 44 and 46 then 48 and 50. Downtrend.

VIX Daily, $VIX

VIX Weekly, $VIX

The Volatility Index ended last week with a strong move up Friday but only to 13 and change. Monday it continued to move higher over the 200 day SMA. It fell back Tuesday though. Wednesday saw another probe to the upside but this one faded intraday and then it gave up and dropped back Thursday and Friday to finish the week lower. The daily chart shows the RSI falling back through the mid line with the MACD turning back at zero.

The weekly picture shows the probe higher failing and it moving back to the tight range it has been in most of the time since April. The RSI on this timeframe is flat at support with the MACD leveling and negative. There is support lower at 12.40 and 11.50 then 10. Resistance above comes at 15.67 and 18 then 22 and 26. Continued Low Volatility.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY had gapped down to end the prior week, giving back a short term break out and finding support at the 20 day SMA. It dipped and closed under the 20 day SMA Monday and recovered Tuesday before a dip lower Wednesday that ended under the 20 day SMA. These two closes under the 20 day SMA were the first since the beginning of July. It jumped back over the 20 day SMA Thursday and then finally closed that gap down Friday with a strong move higher.

This left it higher on the week but with a small open gap below. The daily chart shows the price moving back toward a retest at the highs with the RSI rising off of the mid line and bullish. There is also a small RSI Positive Reversal with a target to 287. The MACD is turning back toward a cross up and is positive. The Bollinger Bands® are also turned higher for a move up.

The weekly chart is much cleaner and shows a solid trend to the upside with 6 of the last 7 weeks closing higher, as it moves toward the target of 289. The Bollinger Bands on this timeframe have now shifted to the upside with the price riding the top higher. The RSI is rising and bullish with the MACD moving up and positive. There is resistance at 286. Support lower comes at 284 and 283 then 280 and 279 before 277.50. Uptrend.

IWM Daily, $IWM

IWM Weekly, $IWM

The IWM had met resistance short of the prior high and turned sideways into the new week. It had a pretty uneventful week though continuing that sideways price action and ending the week slightly higher. The daily chart shows the RSI running along the mid line and bullish. The MACD is turning back toward a cross up and is positive. The Bollinger Bands® are flat. All signs point to more consolidation.

The weekly chart shows that consolidation as well continuing since June. The Bollinger Bands on this timeframe are shifted to the upside to allow a move up. The RSI is rising and bullish with the MACD moving down and positive. There is resistance at 168.70 and 170. Support lower comes at 166.25 and 164.25 then 162 and 160. Consolidation in the Uptrend.

QQQ Daily, $QQQ

QQQ Weekly, $QQQ

The QQQ had gapped down to end the prior week like the SPY. It continued lower Monday and recovered Tuesday before a dip lower Wednesday that ended under the 20 day SMA. Thursday and Friday held building a long bull flag. The daily chart shows the RSI holding at the mid line and bullish with the MACD drifting lower but positive. The Bollinger Bands® are flat.

The weekly chart shows a cleaner trend higher. The Bollinger Bands on this timeframe are shifted to the upside with the price riding the top higher. The RSI is strong and bullish with the MACD flat and positive. There is resistance at 180.50 and 182 then 182.80. Support lower comes at 179 and 178 then 176 and 174 before 173. Consolidation in Uptrend.

With August options expiration over and back to school on its way the equity markets continue to look strong on the longer timeframes. Elsewhere look for Gold to continue lower while Crude Oil joins it heading to the downside. The US Dollar Index may pause in its uptrend while US Treasuries drift higher in broad consolidation. The Shanghai Composite and Emerging Markets are looking really weak as they print multi-year lows and continue lower.

Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts are a bit mixed in the shorter timeframe with the QQQ pulling back, the IWM flat and the SPY running higher. But all three remain in solid uptrends on the longer basis. 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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