From the Charts: Macro Week in Review/Preview October 8, 2010

Last week’s review of the macro market indicators for the week looked like stronger prices for Gold and Oil with the US Dollar Index still broken and on a path lower.  US Treasury Bonds are moving higher but also sideways and need a catalyst to move.  The Volatility Index appears tame for the time being but Equity markets looked a bit tired in shorter time-frames,  a bit more positive in the longer time-frames, so I would not be surprised if there is a small pullback.  The week began as expected with an slight equity pullback and Gold and Oil rising. But we were thrown a curve ball on Thursday with Gold and Oil pulling back slightly. That reversed with the release of the Non-Farm Payroll report Friday, confirming continued weakness in employment. How does this impact the week ahead? 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 continued its run higher Tuesday and was probing the measured move target of 1360 by Thursday.  Recall this is a resistance level from the monthly chart (see chartly feed).  It is putting in a bullish flag now on the daily chart and showing some resistance at 1350.  It is just slightly overbought on the daily chart but the Simple Moving Averages (SMA’s) all are increasing their slope up and the Moving Average Convergence Divergence (MACD) indicator is positive.  It should be able to go higher.  The weekly chart shows it near resistance at the center line of the rising channel near 1352 with resistance higher at 1394.  Here it is also just slightly overbought on the Relative Strength Index (RSI) but not too extended.  The weekly also shows the MACD indicator increasing suggesting more upside.  Support comes at 1340 and then 1310 and 1300.  Look for higher prices to come.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly

West Texas Intermediate Crude broke out of a symmetrical triangle last Friday.  This week it moved higher before back-testing the triangle at 80.14 today and holding.  This is bullish.  It closed today near resistance at 83 with resistance higher at 86 on the daily chart.  The back test worked off the slightly overbought RSI as well.  The MACD on the daily chart is positive and 20 day SMA is looping up through all the the other SMA adding to the bullish view.  On the weekly chart Oil broke above 81 resistance level from August and sees resistance higher at 84 and then 87.  The RSI is positive and has lots of room and the MACD is just starting to grow.  Oil looks headed higher.

US Dollar Index Daily

US Dollar Index Weekly

The US Dollar Index had another tough week falling through support at 78 and 77.35 to close at 77.26.  Both levels are now upside resistance. The 200 day SMA looks to be the final moving average about to slope downward joining the 20, 50 and 100 day SMA’s.  There is some support now at 76.75 followed by  76.  The weekly  chart shows support at 77 with 74.80 and then 71.50 below.  The RSI on the daily chart is oversold but not grossly yet and looking to the weekly the RSI still has room lower before any oversold signals.  The MACD on the daily chart adds to bearish sentiment but the weekly chart MACD signal is actually growing more negative.  This index looks to continue lower.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly

US Treasuries, as measured by TLT, are holding near the uptrend line on both the daily and weekly charts, weak as that uptrend is.  The daily continues to show resistance higher at 106 and there is further resistance at 108 – 108.50.  The weekly adds 115 as top upside resistance.  Support comes at 103.80 – 104 and 103.29  lower, with the weekly chart adding support at 101.80.  I have stated in the past that TLT seems to drift in the breeze and it continues to look that way.  The RSI on the daily has room higher but has been close to flat for 5 weeks and on the weekly it is similar but in neutral territory.  The MACD indicator on the daily chart has rolled over and is crossing lower with the weekly MACD kissing, both quite near zero.  In the positive camp the SMA’s on both charts are pointing higher.  Expect continued movement like the series of clusters on the weekly chart until a catalyst shakes things up.

VIX Daily

VIX Weekly

The Volatility Index is cracking the channel between 21.25 and 28.40 again, where it has been for over 3 months.  The strong move lower today put the MACD into a downward cross and pulled the RSI lower off the neutral line, suggesting that it might go lower and hold the break.  The weekly candle, a big bearish Engulfing candle, adds a lot of weight to the downside.  Support lower comes at 18 and then 16 from the daily chart and 16.93 and then 15.67 from the weekly chart.  The flat SMA lines are resistance above if it gets back into the channel.   Not likely from what I see.

SPY 60 minute

SPY Daily

SPY Weekly

The 60 minute chart on the SPY shows a continued stair step higher.  Today’s move has it heading to resistance at 117.02 and then 117.30-117.50 before a bigger move higher.  The hourly SMA’s have all been sloped positively and continue to be since early September.  On the daily chart the 116.50 resistance area from shortly after the May 6 flash crash is evident.   The next resistance higher is at 117.75 followed by 120.89.  The 115 area from September will now be support with 114.05, the rising 20 day SMA, below.   Adding further to the bullish view  the SPY broke and launched off of the 200 week SMA at 114.56.  Support comes at 112.61 on the weekly below that SMA, with resistance higher at 118 and then 120.89.  The  RSI on both charts support a further move higher as do the rising short term SMA’s on the daily chart.  The MACD indicator on the daily chart is still positive, but the weekly MACD is growing.  This story is bullish.

IWM Daily

IWM Weekly

The IWM is heading to resistance at 70.50 on the daily chart with resistance higher at 72.  It is leaving the triple support area of 67 – 67.60  behind and now sees support at 69.   The shorter frame SMA’s are rising through the longer SMA’s which are starting to turn higher.  The weekly chart shows a strong breakout of the descending triangle continued higher near to resistance at 70with  74.25 as resistance higher.  There is strong support at the triangle and the tightly bunched SMA’s below.   Note that the SMA’s are starting to rise on the weekly time-frame as well.  The RSI on both charts shows room for an upside move and is already pointing higher.  Although the MACD indicator for the daily chart is waning it is still positive and the weekly MACD is increasing, like the SPY.  This also looks to head higher.

QQQQ Daily

QQQQ Weekly

The Q’s are the weakest of the Index ETF’s and is exhibiting a bull flag with a 49.75 top as resistance on the daily chart.  It is nearing the 50.44 high from April which is further resistance.  The SMA’s are rising on the daily chart with the 20 day SMA providing support and lift.  Below the 20 day SMA there is support at 48.60 and then the 47.80 resistance/support line.  On the weekly chart the bull flag is less evident.  There is  resistance  at 50-50.44 then 52 and 54 higher from this longer timeframe view.  The RSI on the daily is stable to rising after working off an overbought condition, but the weekly RSI is moving higher, adding to the bullish case.  Similar to the SPY and IWM the MACD on a daily basis is weaker but the weekly indicator is increasing.  The weekly signal trumps the daily and so adds to the bullish side of the argument.

So next week looks to bring stronger prices for Gold and Crude Oil with the US Dollar Index weak and looking lower.  Bonds look to continue their drift higher until some catalyst sparks a move. The Volatility Index may finally be breaking its channel lower adding to the bullish case for the equity Index ETF’s.  The Equity Index ETF’s for the second week in a row look stronger on a weekly time-frame than on the daily charts, so a pullback could occur on the way higher.  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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