Macro Week in Review/Preview April 8, 2011

Last week’s review of the macro market indicators looked to bring higher prices for Gold and Crude Oil. The US Dollar Index looks to continue lower as US Treasuries join that move. The Shanghai Composite looks to continue to consolidate but with an upward bias, while the Emerging Market ETF continues the move higher. The Volatility Index should continue in a tame and relatively low range allowing the SPY, IWM and QQQ to continue higher. Of the three the IWM looks the strongest followed by the SPY and then the QQQ.

The week played true to the technicals with Gold, and Crude Oil moving higher, and the Dollar Index and US Treasuries moving lower. The Shanghai Composite and Emerging Markets also also moved higher as the technicals suggested. The equity index ETF’s however consolidated with a slight downward bent to them. What does this mean for the coming week? Let’s look at some charts.

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

Gold Daily,$GC_F

Gold Weekly,$GC_F

Gold broke through resistance Tuesday and did not look back. It now is headed higher to resistance at 1475 followed by 1500 and then 1520 on the daily chart. The Relative Strength Index (RSI) is still moving higher and the Moving Average Convergence Divergence (MACD) indicator is increasing with the Bollinger bands (BB) expanding to allow for more upside. The weekly picture is also rosy with resistance overhead coming at 1550 and then 1600. The weekly RSI and MACD are also supportive of a further run higher. The Simple Moving Averages (SMA’s) are all sloping higher on both timeframes as well. It looks like it is time to buy any pullback.

West Texas Intermediate Crude Daily,$CL_F

West Texas Intermediate Crude Weekly,$CL_F

Crude Oil finally broke free from the 104.82 Fibonacci level and started running higher straight through the 110 area without a rest. The daily chart has a rising RSI and increasing MACD as well as expanding BB and upward sloping SMA’s. All this points higher. The weekly chart is no less bullish. The resistance overhead is seen at 115.40 and then 121.29. The rising RSI and increasing MACD combined with the expanding BB and upward sloping SMA on the weekly chart just reinforce the bullish case.

US Dollar Index Daily,$DX_F

US Dollar Index Weekly,$DX_F

The US Dollar Index continued its move lower and looks to do so again next week. The daily chart shows it below the November low with an RSI that is growing more steeply sloped lower and a MACD that is crossing negative. All of the daily SMA are sloping downward as well. The weekly chart reminds of the two Head and Shoulder tops formed one with a target of at least 71.75. There is support lower at 74.80 and 74.30 before a big fall to 71.50, which would satisfy the blue Head and Shoulders top from 2010. The RSI is falling and the MACD growing more negative as the BB expand to allow for more downside on the weekly chart. Any short term reversal looks to meet resistance by 76, but I expect more downside.

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

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

US Treasuries fell out of a rising wedge or megaphone pattern on the daily chart and continued lower under the 50 and 100 day SMA’s. The week closed with an Inverted Hammer on the daily chart, which can be a bullish reversal signal if confirmed, but the trend appears lower. The RSI is steeply sloping lower and the MACD is growing more negative while the BB are expanding on the daily chart. The weekly chart shows the big red candle without any lower shadow, closing basically on the lows of the week. The RSI is now sloping and pointing lower after rejecting at the mid line and the MACD is fading on the weekly chart. Support is prominent at the 8 year rising uptrend at 88.90 for the coming week with 85 below that. A reversal will see resistance at the 50 day SMA and then the 100 day SMA. Expect more downside.

Shanghai Stock Exchange Composite Daily,$SSEC

Shanghai Stock Exchange Composite Weekly,$SSEC

The Shanghai Composite is continuing its drift higher and is near resistance at 3050. The daily chart shows a rising RSI and improving MACD as it peaks above the top BB. It is clearer to see bullishness in the weekly chart. It has a steadily rising RSI and slowly improving MACD but the price trend is steadily higher since January. The BB are starting to open up and facilitate more upside. Above 3050 there is resistance at 3150 and then 3300. Any pullback finds support at 2965 and then the tangle of SMA’s on both the daily and weekly charts. Expect this to continue higher.

iShares MSCI Emerging Markets Index Daily,$EEM

iShares MSCI Emerging Markets Index Weekly,$EEM

The Emerging Market ETF, EEM, continued higher this week through the previous high of 48.78 and on to find resistance at 50.17 the top in May 2008, consolidating there the back half of the week. The RSI has gone flat but firmly in bullish territory and the MACD is waning on the daily chart, suggesting a pullback or further consolidation. The weekly chart is more bullish showing it breaking above the recent channel between 44.20 and 48.40. The RSI is increasing and the MACD is crossing positive on the weekly chart. It did finish outside of the BB and printed an evening star which also support the case for a pullback of consolidation. A continuation higher finds resistance at 52 and then a target on a Measured Move (MM) to the 58 – 60 area. Support on a pullback can be found at 48.78 and then 48.20-48.40. Expect further consolidation in the coming week, again with a bias to the upside.

VIX Daily,$VIX

VIX Weekly,$VIX

The Volatility Index wound lower this week staying between 16 and 18. There is upside resistance on the daily chart at the 18.50-19.00 area and then the previous area around 21.25. All of the SMA are overhead on both the daily and weekly charts to keep volatility in check for a while. The RSI and MACD are starting to move to suggest higher volatility on the daily chart but give the opposite signal on the weekly chart. Expect more of the same next week, subdued volatility in a relatively low range.

SPY Daily,$SPY

SPY Weekly,$SPY

The SPY consolidated for the week but is showing signs of a potential pullback. As it has approached resistance at 134.11 again the range has been widening creating a bearish wedge. Also the RSI is rolling lower and the MACD is waning on the daily chart. There is support lower at 131.46 from the daily chart and then at 130.20. The weekly chart shows the uptrend since September in tact. The RSI is rejecting off of the technically overbought level at 70 and the flat MACD is suggest that consolidation or a pullback are not out of the question within the uptrend. Expect consolidation with a slight bias to a pullback in the coming week.

IWM Daily,$IWM

IWM Weekly,$IWM

IWM fell from its high on Wednesday closing the week with a big red candle. Signs of a pullback presented themselves in the middle of the week as the RSI hit the 70 level and fell back and the MACD started to wane even earlier in the week. There is support at 83 and then at the 81.57 level should it continue lower. The weekly chart shows more of a consolidation week near the top of the previous week’s run. The MACD is improving on the weekly chart but the RSI, although firmly in bullish territory, is rejecting lower. Should it shake off the funk and move back higher there is resistance at 85 and then 92.78, a 123.6% Fibonacci extension of the the retracement of the move lower. The SMA’s are clearly sloping higher,signaling the uptrend is in tact, but expect further consolidation in the coming week with the chance of an additional move lower.

QQQQ Daily,$QQQQ

QQQQ Weekly,$QQQQ

The QQQ consolidated this week in a bull flag over the 50 day SMA. But Friday’s bearish red candle raises a warning flag. Additionally it has now put in two consecutive lower highs and a lower low if it does not move up early next week. The RSI is falling and the MACD is waning on the daily chart as the SMA’s are moving to flat. The weekly chart shows the uptrend and the hold over the 20 week SMA. The RSI has bounced off of the mid line but is rolling again and the MACD is negative. Both suggest more consolidation or a pullback is in store. If it happens then there is support at 55.50 from the daily chart and the 54.26 level. Resistance would come at 58.87 on a shake out higher followed by 61.08. Expect more consolidation with a slight bias, but less so than the SPY or IWM, to the down side in the coming week.

So next week looks for continued moves higher in Gold and Crude Oil as well as continuations lower for both the US Dollar Index and US Treasuries. The Shanghai Composite should continue its run higher but the Emerging Markets may need to consolidate before further upside. The Volatility Index should remain tame. The Equity Index ETF’s all show signs of a potential pullback or consolidation with the QQQ looking the strongest and the IWM the weakest. Use this information to understand the major trend and how it may be influenced as you prepare for the coming week ahead. Trade’m well.

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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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