Macro Week in Review/Preview May 14, 2011

Last week’s review of the macro market indicators looked for further downside if Gold gets below 1475 and upside over 1500. Also look for Crude Oil to continue lower with support at 97 but a move above 100 turning it bullish. The Dollar Index looks to continue higher next week along with US Treasuries. The Shanghai Composite looked to continue lower in the coming week along with Emerging Markets with the Volatility Index to remain in a range between 15.50 and 22. The SPY and IWM looked ready for more downside longer term with the QQQ more bullish. All of the Equity Index ETF’s will trigger buys on moves to new highs though after printing a series of higher highs an higher lows.

The week from a Macro perspective was mostly a dud. If you look at the beginning and the end of the week. Gold and Crude stayed in their range and the foreign markets acted as expected. The Equity Index ETF’s SPY, IWM and QQQ also were range bound though. The US Dollar Index and Treasuries did head higher. What does this action tell us about the possibilities 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 started the week higher but the rising trendline from November proved to be resistance. It now looks at a crossroads on the daily chart bounded by 1475 to the bottom and the trendline to the top. The rising Simple Moving Averages (SMA) show the trend is higher but with the Relative Strength Index (RSI) pointing lower and the Moving Average Convergence Divergence (MACD) indicator growing more negative look for more consolidation or downside in the short term. The weekly chart shows its first crack in a long time with the doji candle confirming the bearish engulfing candle lower from last week. There is a lot of room below before support can be found at 1445 and then 1425. Despite that it would still be in an uptrend upon holding the lower level. The RSI and MACD are pointing lower as well. Look for a bias to the downside next week for Gold.

West Texas Intermediate Crude Daily,$CL_F

West Texas Intermediate Crude Weekly,$CL_F

Crude Oil jumped up off of last Friday’s hammer on Monday but then stalled at the 104.82 resistance level. The trendline back to mid 2009 is also playing a role now acting as resistance higher and the March low as support. The daily chart has to be treated as a bear flag but with support also from the rising 100 day SMA. The RSI is leveling as is the MACD so it may base out of the flag. The weekly chart also looks bearish. It is beginning a bear flag under the trendline resistance. The RSI is trying to turn up but the MACD is crossing bearishly negative. Look for this to move n the 93 to 101 range until it determines a direction, with a bias to the downside in the short term.

US Dollar Index Daily,$DX_F

US Dollar Index Weekly,$DX_F

The US Dollar Index continued its push higher and looks primed for more upside on the daily chart. Through the 20 and 50 day SMA it is heading for the 100 day SMA which would put it just below a retest of the long term uptrend line. The RSI and MACD both agree that there is more upside to come. The weekly chart also looks bullish with a MACD crossing positive and a RSI sloping higher. All signs point higher and if it gets to the 20 week SMA/100day SMA expect it to test the the major trendline. Through that is where I will turn bullish on the Dollar Index.

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

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

US Treasuries, measured by the TLT ETF, put in a bull flag for the week on the daily chart right around the 50% Fibonacci level at 94.98. It is over all the daily SMA’s now and has a RSI that is skidding sideways in the bullish range, but the MACD is diverging about to cross negative. Watch for a breakdown out of the flag. There is support from the rising blue trend line and all the SMA’s below that, which suggest any pullback could take some time. The weekly chart shows resistance at 96 just above causing a stall. But the RSI and MACD both point solidly higher on this timeframe. The lone troublesome point is that the volume is diverging. look for TLT to continue higher next week, with a chance that it consolidates or pulls back slightly first.

Shanghai Stock Exchange Composite Daily,$SSEC

Shanghai Stock Exchange Composite Weekly,$SSEC

The Shanghai Composite continued lower on the week but is showing some signs that may be over soon. The RSI is now leveling out and the MACD is improving on the daily chart. Look for the tangle of SMA’s to continue to play a role next week. The weekly chart shows a tight range still within the symmetrical triangle and the SMA’s, but a a doji after falling for the last 3 weeks. The MACD is close enough to zero and flat enough not to matter but the RSI looks to be bouncing off of the mid line. Look for the Shanghai Composite to continue in a tight range between 2800 and 3000 next week with a bias to the upside.

iShares MSCI Emerging Markets Index Daily,$EEM

iShares MSCI Emerging Markets Index Weekly,$EEM

The Emerging Market ETF, EEM, continued lower this week falling through the first trend support at 47.20 to end the week. With a falling RSI and MACD growing more negative it looks to have more downside to come. The weekly chart shows it losing support of the channel breakout also with a falling RSI and a MACD crossing lower. Look for more downside next week with support at 46 on the daily chart and then 44.30 on the weekly chart.

VIX Daily,$VIX

VIX Weekly,$VIX

The Volatility Index moved in a tight less than 3 point range for the week finding support near 16. The daily RSI is flat lined and the MACD falling but stabilizing. The weekly chart shows a similar story of stability in a tight range. Expect this to continue in the coming week with 15.50 as the bottom and 21.25 as the top.

SPY Daily,$SPY

SPY Weekly,$SPY

The SPY also had less than a 3 point range for the week. But it seemed to use most of that range each day. The daily chart shows a short term downtrend sitting near the 20 day SMA and previous high and prior Fibonacci resistance at 134.11. The RSI and MACD though both point lower. The weekly chart shows the uptrend in tact but printed a doji confirming last weeks bearish engulfing candle lower. The RSI and MACD on this timeframe also point to more downside. Look for more downside next week with support at 133 and then 131.46 if it cannot hang on at the current levels, but I do not see major downside at this point.

IWM Daily,$IWM

IWM Weekly,$IWM

The IWM also had less than a 3 point range for the week and seemed to use most of that range each day. The daily chart shows a short term downtrend heading to the 50 day SMA with the previous high support at 81.57 below. The RSI and MACD though both point lower. The weekly chart shows the uptrend remains and it printed a small body candle near last weeks low. The RSI and MACD on this timeframe also point to more downside. Look for more downside next week with support at 83 and then 81.57 if it cannot hang on at the current levels, but I do not see major downside at this point with the SMA’s all still sloping higher.

QQQ Daily,$QQQ

QQQ Weekly,$QQQ

The QQQ also had a range just over 1 point for the week and used most of that range each day. The daily chart shows a bull flag sitting on the 20 day SMA near the previous high resistance at 59.30 and the 58.87 Fibonacci level. The RSI and MACD though both point lower. The weekly chart shows the uptrend remains and it printed a near doji candle continuing a 3 week bull flag. The RSI and MACD on this timeframe are more neutral though. Look for more consolidation next week with a bias to the upside but a potential for a short term pullback. Support should come at 58 or 57 for any pullback, and a break of the flag to new highs could end up dragging all the Equity Indexes higher.

So the coming week looks like more downside for Gold and Crude Oil. The upside path looks to continue for the US Dollar Index and US Treasuries. The Shanghai Composite looks to reverse higher with the Emerging Markets continuing lower. Volatility looks to remain in check. The Equity Index ETF’s will look to the QQQ for leadership to try to pull them higher, with the SPY and IWM looking weaker without any help. 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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