Macro Month in Review/Preview November- December 2011

Last month in this space my Monthly Macro Review/Preview suggested the upside for Gold would continue while Copper consolidates and is bullish for Crude Oil and bearish for Natural Gas. The US Dollar Index looked to continue the long term trend lower while Treasuries continue to rise. In foreign markets the Shanghai Composite looked to continue to move lower while the German DAX consolidates and Emerging Markets continue the long term trend higher with the intermediate term joining that trend. Volatility can go either way within the long term uptrend but looked to remain above the lower range experienced in the last six months. Despite that uncertainty, the Equity Index ETF’s SPY, IWM were set up to continue lower in the coming months with the QQQ consolidating, all within the longer term uptrend. As noted on the individual charts there is a need for confirmation of the recent moves in the short term to the upside to change the downward bias.

On the short term scale for the past month Gold mainly consolidated while Copper started lower but then recovered. Crude Oil moved higher and Natural Gas lower as expected. The US Dollar found a bid and joined Treasuries moving higher. In the foreign markets all started lower with Emerging Markets and the German DAX bouncing after Thanksgiving, while the Shanghai Composite continued lower. Volatility moved sideways while the US Equity Index ETF’s SPY, IWM and QQQ all ran lower before a massive move up to end the month near even. How does the added month of data impact the longer term picture. let’s look at some charts.
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As always you can see details of individual charts and more on my StockTwits feed and on chartly.)

Metals

Gold, $GC_F

Gold continues to move within the rising wedge bounded by the trendline from late 2008 to the bottom and pressing on the top rail. For December that top rail resistance is now at 1792 with 1830 and 1933 from the August September Tweezers Top after that, then the top rail at 2040. Support comes at the bottom rail at 1660 followed by the series of 3 monthly lows at 1628 and then 1564. The Relative Strength Index remains bullish and strong while the Moving Average Convergence Divergence (MACD) indicator continues to move sideways in positive territory, both supporting more upside. The Simple Moving Averages (SMA) are still all running higher and clearly show the trend. look for more upside in Gold in the next few months.

Copper, $HG_F

Copper printed a long shadowed doji for November doing nothing to convince a new trend one way or the other. Until then call the move lower and consolidation a bear flag. but with the volume still remaining large it is best to stay flat or with current position. The RSI is kinking back lower after touching the mid line while the MACD continues to grow more negative. These support further downside. it does still have some room to move sideways within the bearish (red) Pitchfork to the Upper Median Line without changing the trend down and it is certainly not moving towards the Median Line of the bullish (green) Pitchfork. Downside support is at 3.00 and then 2.65 lower, and it would take a move over 3.95 to turn bullish.

Fuel

West Texas Intermediate Crude, $CL_F

Crude Oil broke above the bearish Pitchfork in November and is continuing toward the Median Line of the bullish Pitchfork. It has support from a MACD that is crossing positive and a RSI that is moving back higher, having only barely dipped below the mid line. A move above the dotted Hagopian trigger line at 110 would suggest a strong move higher with resistance at 115 and then the 2008 highs. Look for more upside in the coming months.

Natural Gas, $NG_F

Natural Gas tested the rising trendline support and held. That is the good news. The RSI cannot get over the mid line and the MACD is ready to cross negative again. It also remains below all of the SMA’s which are falling. And the candle that tested the trend was a bearish engulfing candle. All bad news. It may consolidate but the bias remains to the downside.

Currency & Debt

US Dollar Index, $DX_F

The US Dollar Index held steady printing an inside month and a possible Tweezers Top right near the rising bottom rail of the symmetrical triangle and under the 20 and 50 month SMA confluence. All of the SMA’s are trending lower. There are a couple of potential bright spots though. The MACD has crossed positive and although it is stalled at the mid line the RSI is trying to run higher again. It will take a move above 80 to turn the trend full bullish and until then lets call it consolidating, with a move below 75 bearish.

US Treasuries, $TLT

US Treasuries, as illustrated by the ETF TLT, continues to build a bull flag after the run higher, moving back into the Bollinger bands, but the increasing length of the shadows and the doji for November suggest some indecision. It could still break out higher but the possibility of a move lower comes into play with the doji. The RSI is bullish near 70 but is starting to kink lower while the MACD is continuing to grow more positive. The trend remains higher and it will take a move be 112 to change that.

Foreign Markets

Shanghai Stock Exchange Composite, $SSEC

The Shanghai Composite continued a bear flag for November with a red candle on the 100 month SMA. The trend continues to be lower. The RSI is trending lower, the MACD is flat but negative and the shorter SMA’s are rolling lower. There is nothing positive here. A move lower under 2300 will trigger a target of 1750 – 1660 below. It will take a move over 2700 to reverse the downtrend.

German DAX Composite, $DAX

The German DAX printed a Hollow Red Hanging Man candle in November, failing to confirm the bullish engulfing candle from October. It continues to hold near the 6000 support/resistance level and among the mesh of SMA’s. The RSI held over 40 to remain bullish while the MACD diverges growing more negative. Look for more consolidation around the 6000 level in the coming months with a move below 5400 starting a bear trend and target of the lower rail of the ascending triangle and a move above 6500 a bull trend towards the 7500 area.

iShares MSCI Emerging Markets Index, $EEM

Emerging Markets, as measured by the ETF EEM, also printed a Hollow Red Candle but a doji in this case, on the 50 month SMA. It continues to move to the right toward the intersection of the bullish and bearish Pitchforks with tests down to the 38.2% Fibonacci level at 35.90. The MACD is slowly growing more negative and the RSI now back at the mid line after holding bullish over 40 continue to create conflicting signals. look for more sideways motion in the coming months with a move below 395.90 triggering a trend lower and a move above 44 a continuation higher.

US Equity Markets

VIX, $VIX

The Volatility Index confirmed the bearish engulfing candle from October moving lower in November. It is now touching the highest of the tightly bunched SMA’s. The trend looks lower but could be stalled by all those SMA’s and the big support near 25. If not 16.45 is the next step lower.

SPY, $SPY

The SPY is clinging to the Upper Median Line of the bearish Pitchfork and just above the Median Line of the bullish one. The RSI held bullish but is flattening and might roll again, while the MACD is growing more negative. The SMA continue to converge near 112 which has been support. Shift this into neutral now. A move below 118.80 would be bearish and a continuation higher over 128, and through the Pitchfork bullish.

IWM, $IWM

The IWM also printed a Hollow Red candle in the top of the range of the previous bull engulfing candle. It is hanging at the neck line of the Inverted Head and Shoulders pattern near 73.50 and the Median Line of the bullish Pitchfork. The RSI held bullish but is flattening and might roll again, while the MACD is holding steady negative. The down move here looks to be over as well and this can go into the neutral bucket also. A move over 75 wold trigger a bullish trend and a move below 65 a renewed push lower.

QQQ, $QQQ

The QQQ also printed a Red Doji candle in the top of the range of the previous bull engulfing candle. It is hanging near the Median Line of the bullish Pitchfork as it drives through the bearish Pitchfork. The RSI held bullish but is flattening and might roll again, while the MACD is holding steady negative. The price action is almost forming an expanding wedge or descending triangle from the beginning of this year. A move over 60 would trigger a bullish trend and a move below 50 a push lower.

The monthly charts have morphed a bit in the Equity Index ETF’s with the previous downward bias turning neutral. In the metals Gold still looks higher but Copper is looking better lower. If Copper does fall it could have a negative influence on the Equity ETF’s. In the fuels Crude Oil looks to continue higher, bullish for Equities, and Natural Gas to continue lower. The US Dollar Index has moved into a neutral view from a downward bias and US Treasuries look to continue higher, both providing a negative influence to Equities. In the foreign markets The German DAX and Emerging Markets look to be in neutral while the Shanghai Composite looks to continue lower. Sharp moves lower in the German DAX or Shanghai Composite would be negative for Equities. Volatility looks to be slowly waning providing a supportive environment for Equities. And the Equity Index ETF’s themselves are all into a neutral mode on the monthly timeframe. Look for outside influences to rule. Use this information to understand the long term trends in Equities and their influencers as you prepare for the coming months.

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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