From the Charts: Macro Week in Review/Preview October 22, 2010

Last week’s review of the macro market indicators for the week looked to bring higher prices for Gold, and perhaps a  slight pullback in Oil.  The US Dollar Index still looked weak but might see a quick bounce and US Treasuries looked to continue lower.  The Volatility Index should continue to be relatively benign, but equities again look weaker in the daily charts and may see a rest or quick pullback but the weekly charts still all point higher.  Right out of the gates Monday the action in Gold started to change that and by Thursday it was down over $40 from last weeks close.  That move has put a floor on the US Dollar Index and changed my short term view to be more cautious as detailed in my write up last night. With the battle done for the week how does it look now and what can we expect next week? Let’s look at the charts.

(As always you can see these individual charts and more on my twitter feed and on chartly.)

Gold Daily

Gold Weekly

Gold had its worst week since July and looks to have put in a short term top. From the weekly chart it is clearly still in a long term uptrending channel and has some room to pull back to 1255 or lower before that trend can be reversed. But the short term trend now appears to be lower. The daily chart suggests that 1310 or 1298.78, a 38.2% retracement of the most recent up move, could provide support. The Relative Strength Index (RSI) has been falling on the daily since the drop began and today is near 50. The Moving Average Convergence Divergence (MACD) indicator is also growing increasingly negative on the daily and starting to wane and rollover on the weekly. It did print a hammer today though so the drop may be over. If Gold bounces there will be resistance at 1337.70 and 1352 followed 1370 which is important on both the daily chart and the midpoint of the channel on the weekly chart.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly

Crude oil has had a tough time breaking above the resistance at 84 from the weekly chart. This week it retested the break out of the symmetrical triangle and held, creating good support at the 80 level. On the weekly chart it appears to by vacillating about the 81 resistance/support level. If it can get up through the resistance at 84 then there is further upside resistance at 86 from the daily and 87 on the weekly chart. However if support at the triangle fails there is a lot of support underneath at the cluster of Simple Moving Averages (SMA’s) on both charts between 77.27 and 78.36. It needs a catalyst to push it one way or the other.

US Dollar Index Daily

US Dollar Index Weekly

The US Dollar Index ended last week with a doji star, signifying indecision, and opened Monday with a hammer, suggesting a short term bottom may be in place. The same doji star showed on the weekly last week and has been followed by a bullish candle reinforcing the message form the daily chart. The fall stopped at 76.15 just above the 76 support area and now has additional support at 76.75 and 77. As the bounce continues it will see resistance at 77.74 from the 20 day SMA and then 78 and 79. The RSI on both the daily and weekly is rising as is the MACD on the daily supporting more upside. Although the MACD is negative on the weekly it is starting to decrease.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly

My proxy for US Treasuries, the iShares Barclays 20+ Yr Treasury Bond Fund, ticker TLT, is right back where it was a month ago on the weekly chart printing a long legged doji near the bottom of the previous long red candle. This time however it is on the downside of a long uptrend and is indicating a topping and rollover in bond prices. It has been hovering on the 100 day SMA which is coinciding with the 20 week SMA as support. If it loses this attachment there is support lower at 100 on the weekly and then 98 on both charts. There is upside resistance at 102 and then the 20 and 50 day SMA’s on the daily chart before it can test the uptrend.

iShares MSCI Emerging Markets Index Daily

iShares MSCI Emerging Markets Index Weekly

The newest addition to the macro review is the iShares MSCI Emerging Markets Index, ticker EEM, which will be used as a proxy for global emerging markets, where all of our quantitative easing money is going. The daily chart shows that after falling out of a long rising channel it has been caught by the parallel rising 20 day SMA. There is upside resistance on the daily chart at 46.30 and then the high of 47.03. The MACD on the daily is still negative and the RSI falling suggesting a pullback may continue, but shifting to the weekly it is another story. The weekly chart shows a break out of a long consolidation channel and suggests that any pullback might just be a retest of that channel. Based on the move up before the channel the target on a hold of support at the channel at 43.40 would be around 55.

VIX Daily

VIX Weekly

The Volatility Index continued under the 21.25 level that had been support for some time after testing it this week. The falling 20 day SMA has been resistance for a couple of weeks and is now at 20.85. There is support from the daily chart at 19, 18, 17 and 16.25 and on the weekly chart at 19, 16.93 and 15.67 so I do not expect it to go much lower if at all. Expecting more of the same next week.

SPY 60 minute

SPY Daily

SPY Weekly

The hourly chart of SPY shows the leveling continued this week. I show this chart because it gives the best visual of the slowdown in the market rise. From the daily chart there appears to be a consolidation range developing between 117 and 118.67, with the 20 day SMA rising to give it added support. Below that there is support at 115. Above the range there is upside resistance at 119.69 and then the April high at 120.89. Add the rolling MACD to the picture and flattening RSI and it looks like a rest or pullback is in store. When turning to the weekly chart though the picture is quite different. The SPY on the weekly chart is continuing its rise after breaking a channel 5 weeks ago and has support of a rising RSI and MACD. So perhaps a short term rest or slight pullback but longer term higher levels to come.

IWM Daily

IWM Weekly

IWM rebounded after a fall Tuesday to have a trend up week but is looking tired on the daily chart. The MACD has rolled over and crossed and the RSI is flat but in the bull territory. There is support from the rising 20 day SMA here as well and then the 67 to 67.60 recent tops below. Resistance appears at 71.25 and 72 before the April high of 74.23. Here as well, the weekly chart paints a different picture with a rising trend after a break out of a wedge channel, but ends with a Hanging Man, which is bearish if confirmed.The MACD and RSI on the weekly are also rising adding to the bull case. Another case where a rest or brief pullback may occur but it looks rosy longer term.

QQQQ Daily

QQQQ Weekly

The QQQQ gives a similar read to the SPY also, in a range, this time, between 51 and 51.75. The RSI has been hugging the overbought line at 70 for some time and the MACD is virtually flat. Consolidation. Support lower is at 50.44 then 50.06, the rising 20 day SMA. Resistance higher comes at 52 and then 54 as seen on the weekly chart from December and October 2008. The weekly chart here also looks more bullish exhibiting a rising trend, and rising RSI and MACD indicators, but printed a potentially bearish Hanging Man candle this week. This also could rest or pullback a little before moving higher.

So next week looks to bring weaker prices for Gold and a continued rise in the US Dollar Index. US Treasury Bonds look to move lower as Oil consolidates in a range waiting for a catalyst. Emerging markets look to move higher but may have some short term resistance. A steady a relatively low volatility index should just be a innocent bystander. The equity markets look like they may pause or retreat slightly in the short term but are poised to move higher long term. Good luck next week!

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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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