Macro Month in Review/Preview June-July 2011

Last month in this space my Monthly Macro Review/Preview suggested the outlook was positive for Gold and Crude Oil with a good chance of further consolidation for Crude Oil first. The US Dollar Index looked to resume its downtrend after taking a runner in May while Treasuries continued higher. The Shanghai Composite looked to move lower with some potential for further consolidation while Emerging Markets drift higher. Volatility looked to remain in check giving a positive environment for the Equity Index ETF’s SPY, IWM and QQQ to continue their trends higher, although all three were showing signs of tiring or consolidation to happen first.

Well that last part was right. Gold moved lower but remained near its highs, while Crude Oil fell lower. The US Dollar Index moved generally sideways before finishing lower while US Treasuries consolidated before falling at the end of the month. Thee Shanghai Composite did move lower but then bounced ending flat while Emerging Markets did the same. The Volatility Index saw a bump higher that disparaged by month end and the Equity Index ETF’s moved lower before regaining most of their drops and finishing slightly lower. How does this impact the long term view going forward? Lets look at the charts.

As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

Gold, $GC_F

Gold remains in a bullish uptrend within a rising wedge. It printed a bearish engulfing candle for June but has support at the rising trendline at 1500. Currently it is midway between the Upper Median Line (UML) and the Median Line (ML) of the Andrew’s Pitchfork and could be attracted either way. The ML sits at 1435 currently for July. The Relative Strength Index (RSI) elevated and currently shifting lower while the Moving Average Convergence Divergence (MACD) indicator is positive but possibly decreasing. Hardly a bearish scenario but a couple of cracks showing in the uptrend. Look for a test of the rising trend support in the near term and pullback possibly to the ML. An upside move over the previous high at 1563 has resistance at 1600 and then 1640.

West Texas Intermediate Crude, $CL_F

Crude Oil is testing its uptrend with a pullback to the 95.36 Fibonacci level. The RSI is moving sharply lower and the MACD is starting to fade. Also notice that it s moving away from the ML of the Andrew’s Pitchfork toward the Lower Median Line (LML) but with many levels of support and many SMA’s in the way. If it were to get below the 79.12 level, under the 20 month and 50 month SMA then a move to the LML is more likely. In the meantime look for more downside in the coming months with support under that 95.36 Fibonacci at 91.40 and then 88.

US Dollar Index, $DX_F

The US Dollar Index tested higher near the breakout of the symmetrical triangle again in June but fell back printing another long upper shadowed candle. As long as it fails to move back into the triangle above 77.21 the downtrend is in tact. The RSI in bearish territory and trending lower and the MACD negative support more downside. Look for continued consolidation in the 73 to 76 range with a bias for a break down lower of over the next few months, with any move below 71.50 accelerating lower.

iShares Barclays 20+ Yr Treasury Bond Fund, $TLT

US Treasuries, measured by the ETF TLT, printed a bearish Dark Cloud Cover candle for the month of June, but held above support at 93 and the 20 month SMA. The volume was high for the month but the RSI has remained in bullish territory above the mid line and the MACD is improving. With the rising SMA’s the technicals point to support holding. Any continued pullback should find support below 93 at the rising 8 year uptrend at 90.37 for July. Look for more consolidation around the 93 to 97 range in the near term with a downside bias. If it breaks higher over 97.5 then 102.5 and 105 are in play.

Shanghai Stock Exchange Composite, $SSEC

The Shanghai Composite continued it fall below the rising support line. June tested lower but rose to close the moth near unchanged. The range between the 2714 and 2956 Fibonacci’s is proving to be significant over the last 9 months. With a RSI that is flat at the mid line and a flat MACD, look for more consolidation in this range going forward. A move out of the range higher sees resistance at 3150 and then 3366 and a move lower support at 2590 and 2400.

iShares MSCI Emerging Markets Index, $EEM

The Emerging Markets, measured by the EEM ETF, are starting to weaken. The candle for June tested lower and recovered but the RSI is moving lower with the MACD declining. Look for more testing of the downside with support at 44.10 and then 42.60 lower. The slope of the SMA, RSI and MACD suggest a slow slog lower.

VIX, $VIX

The Volatility Index consolidated out of its channel but remained very subdued in the end. It tested higher again and printed a long upper shadowed candle. Typically these long upper shadows signal a move lower. If it does fall below 14.80 then the next level of support is at 12.70 and then 10. That is low but not unprecedented. It still has a lot of work to do to get over the bundle of SMA’s between 20.50 and 22 so expect it to remain relatively stable in the near term.

SPY, $SPY

The SPY fell through the rising support trendline, made a strong attempt to recover, but could not retake it. The RSI is now rolling over and the MACD is waning. These indicate more downside. Also the volume picked up for the month on a down month. Without quickly retaking the trendline, look for more downside with support at 126.80 and the 122.33.

IWM, $IWM

The IWM tested below the 81.50 high area from 2007 and recovered. But it also has a RSI that is rolling over and a MACD that is decreasing and is well above its 20 month SMA. It looks lower going forward and if it were to fall below the 81.50 level then there is support at 79.10 and then a test of the breakout of the neckline of the Inverted Head and Shoulders at 73.50 is likely. If the pullback holds 81.50 then a move back over 84 and test of highs can happen.

QQQ, $QQQ

The QQQ has continued to consolidate while testing the support of the 54.26 area. The 57 to 63 resistance from 2001 is proving formidable. The RSI is rolling lower and the MACD is starting to fade, indicating more down side or consolidation, but with the volume fading the scene is set for a bull flag to continue. Look for 54.26 to continue to provide support with a break leading to 50.60, and any move higher continuing to find resistance between 57 and 63 for a while. More consolidation to slightly down.

The monthly charts have shifted to showing very little upside in any area. Can they rebound, sure. But they look biased lower now. Gold looks to consolidate or pullback in the uptrend while Crude Oil moves lower. The US Dollar Index is biased lower but in a range with US Treasuries also in a range. The Shanghai Composite looks to move on a consolidation range while Emerging Markets are biased lower in a range. The Volatility Index looks to remain stable but US Equity Indexes are all starting to point lower, with QQQ the strongest followed by IWM and SPY. Use this information to understand the long term trends in Equities and their influencers as you prepare for the coming months.

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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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