Macro Week in Review/Preview January 28, 2012

Last week’s review of the macro market indicators looked heading into the last full week of January that Gold would consolidate or move higher within the intermediate downtrend, limited by 1700, while Crude Oil continued to consolidate within the 92.50 to 102.5 channel. Both the US Dollar Index and Treasuries were on watch for a breakdown lower. The Dollar out of a rising channel and Treasuries an ascending triangle. The Shanghai Composite looked to continue higher within the downtrend while Emerging Markets moved up within the broad channel with 42.54 at the top. Volatility looked to consolidate or bounce within the downtrend after a strong move lower. These influencers combined to support more upside for the Equity Index ETF’s, and the charts for the SPY, IWM and QQQ agreed and looked higher.

The week began with Gold behaving only to blow through 1700 midweek and continue higher while Oil did hold the range. The US Dollar did break lower but Treasuries bottomed and then consolidated. The Shanghai Composite did nothing because it was closed all week for the New Year holidays while the ETF proxy, $FXI, drifted higher, and Emerging Markets continued higher before consolidating to end the week. Volatility tested lower but went sideways most of the week. The Equity Index ETF’s had a mixed week, all testing higher but with the SPY pulling back Friday. What does this mean for the coming week? Lets look at some charts.

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Gold Daily, $GC_F

Gold Weekly, $GC_F

Gold started off slow but quickly broke higher and continued to end the week at the mid line of the previous symmetrical triangle near 1726. It has a Relative Strength Index (RSI) on the daily chart that is bullish and rising and a Moving Average Convergence Divergence (MACD) indicator that is positive and increasing. Both support more upside. The weekly chart shows it back in the rising channel and breaking above the short term descending wedge, reversing it. The RSI continues to run along down trending support but is moving higher while the MACD is improving rapidly towards a bullish cross to positive. Resistance higher is found at 1750 followed by 1800 and 1885. Support is found lower at 1700 followed by 1665-1670 and then 1626 and 1550. Resumption of Up Trend

West Texas Intermediate Crude Daily, $CL_F

West Texas Intermediate Crude Weekly, $CL_F

Crude Oil continued to move in the broad channel between 93 and 102.5 on the daily chart, finishing the week over the 50 day Simple Moving Average (SMA). The RSI continues to trend lower on down trending support while the MACD is improving towards zero. It could go either way on this time frame and shrinking body candles agree. The weekly chart shows the tight range clearly with rising support of the extension of the 2010 support line coming up at 95. The RSI has been unable to turn to bullish stalled under 60 while the MACD is positive but fading. There is resistance at 103.83 followed by 113.50. Support lower comes at 93 and then 88.50. Look for more of the dame next week. Continued Range Movement 93 to 103.83

US Dollar Index Daily, $DX_F

US Dollar Index Weekly, $DX_F

The US Dollar index is continuing the downtrend on the daily chart with some long uppershadow candles. It finished the week making a lower low. The RSI is also making a lower and near turning bearish, while the MACD is growing more negative. On the weekly chart price is moving down below the rising channel toward the confluence of the SMA’s. The RSI is heading lower but remains bullish on this time frame as the MACD fades toward the zero line. Both support more downside. There is support lower at 79 and 78.50 followed by 78 and 77.20. Resistance on a move higher comes at 80.28 and then 81. More Downside

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

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

US Treasuries, as measured by the ETF $TLT, found a bottom at 115 and moved higher to end the week, as it re-approaches the 20/50 day SMA. The MACD is rising towards a positive cross while the RSI is moving back higher after making a lower low. Cautiously higher on this time frame. On the weekly chart there was a leak lower out of the flag before it moved back in. The RSI is trending lower but still bullish and the MACD is growing more negative. Resistance is at 118.67 and 121 with 124 above that. Support can be found at 115 and 112.50, followed by 110 and 105. A weekly close under 115 will signal a move lower. More Consolidation Between 115 and 121.

Shanghai Stock Exchange Composite Daily, $SSEC

Shanghai Stock Exchange Composite Weekly, $SSEC

Reprinted from last week as the Chinese market was closed for the New year holidays. The Shanghai Composite continued higher ending near resistance at 2320 and showing positive signs. The RSI made a higher high and is near turning bullish while the MACD started moving higher again, both on the daily chart. The Bollinger bands are continuing to expand as it moves up as well. The weekly chart shows that it is not time to be bullish yet though as there is still upside room in the downward channel to a retest of the 61.8% Fibonacci level at 2357. The RSI on this time frame is running higher but only barely over 40 and the MACD remains a flat line giving no guidance. The trend remains lower and there is support at 2230 and 2150 below that. Resistance on a break of the channel higher comes at 2400 and above 2540 starts the watch for a trend change. Up Move within Downtrend

iShares MSCI Emerging Markets Index Daily, $EEM

iShares MSCI Emerging Markets Index Weekly, $EEM

Emerging Markets, as measured by the ETF $EEM, ran higher and ended near resistance from the August move lower at 42.54. The RSI on the daily chart is bullish and strong and the MACD is positive but is starting to fade as it consolidates in a bull flag. The weekly chart shows that 42.54 has held importance in the past as well and is very near the 50 week SMA overhead. The RSI on this time frame is rising and nearly turned bullish while the MACD is positive and growing. There is resistance above 42.54 at 43.40 and then 48.20. Support lower is at 40.75 and 35.91. Consolidation or Upside in the Current Trend.

VIX Daily, $VIX

VIX Weekly, $VIX

The Volatility Index continued in the downtrend with a slight uptick for the week. The daily chart is consolidating as it trends lower. The MACD is flat lined and offering no guidance while the RSI is continuing to bounce along the 30 level and bearish. The weekly chart shows the descending wedge continuing with a hint of a Hammer, potential reversal candle. The RSI on this time frame continues to trends lower and is making new lows. Support lower comes at 15.67 followed by 12.40, and resistance higher at 21.25 and 24. Continued Slowing Downward Trend.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY probed higher and pulled back, holding over support of the 7 day consolidation zone. The RSI is strong and bullish while the MACD is starting to fade as the consolidation continues. Still trending higher. On the weekly chart the price passed through the Fibonacci Arc and continued higher printing a long shadowed candle. The RSI is nearly into bullish territory as it runs higher and the MACD is growing more positive. There is resistance higher at 134.95 and above that 3 year highs and very bullish. Support comes at 130 and 128 followed by 125 lower. Continued Upside with Chance of Consolidation.

IWM Daily, $IWM

IWM Weekly, $IWM

The IWM pushed higher as well finishing near the high of the week and continuing the strong uptrend. The RSI is strong and bullish on the daily chart while the MACD is positive but stalled and flat. Still trending higher. On the weekly chart the price is moving strongly higher. The RSI is nearly into bullish territory as it runs higher and the MACD is growing more positive. There is resistance higher at 80.50 and 81.57 followed by 85.40 and new highs. Very bullish. Support comes at 76.65 and 74.50 followed by 70.60 lower. Continued Upside.

QQQ Daily, $QQQ

QQQ Weekly, $QQQ

The QQQ pushed higher also finishing near the high of the week and continuing the strong uptrend. The RSI is strong and bullish on the daily chart while the MACD is positive but starting to fade. Still trending higher. On the weekly chart the price is moving strongly higher out of the Diamond. The RSI has turned bullish as it runs higher and the MACD is growing more positive. There is are significant upside levels at the Fibonacci extensions at 61.08 and 65.32 and the target for the Diamond breakout at 69. Very bullish. Support comes at 60 and 59 followed by 56.50 lower. Continued Upside.

As January is closing out the coming week looks to bring more upside for Gold and further consolidation within the broad 93 – 103.83 range for Crude Oil. The US Dollar Index looks to continue lower while US Treasuries consolidate after probing lower. The Shanghai Composite and Emerging Markets are biased to the upside after China taking the week off. Volatility looks to continue to slowly move lower toward support. These influencers create a positive environment for the US equity index ETF’s SPY, IWM and QQQ, and their charts are all pointing to higher levels. A strong move by China lower could change this picture or as sharp move higher by the US Dollar Index. Use this information as you prepare for the coming week and trade’m well.

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