Macro Week in Review/Preview May 21, 2011

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

The week began as the charts suggested with Gold and Oil falling. Treasuries started to the upside but the US dollar index took a breather. Foreign market proxies were flat and the US markets began lower. How did the week end and what does it mean for next 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 found its footing after testing the support level at 1475 and finished the week above the 20 day Simple Moving Average (SMA) with strong move Friday. The daily chart shows that the Relative Strength Index (RSI) found a bottom at the mid line and is now rising and the Moving Average Convergence Divergence (MACD) indicator peaked negative and is now improving. The weekly chart shows that support holding and the confirmation higher of the doji from last week with and RSI that has turned back higher. Look for more upside next week with resistance coming at 1530 and 1538 followed by the previous high at 1575. Any pullback will see support at 1500 and then 1475.

West Texas Intermediate Crude Daily,$CL_F

West Texas Intermediate Crude Weekly,$CL_F

Crude Oil is consolidating around the 100 day SMA and extension of the 2 rising trend lines, finishing the week virtually unchanged. Will it be a bear flag that continues lower or a base to launch higher? The RSI and MACD on the daily chart are starting to look up. The weekly chart shows a divergence with the RSI finding support at the mid line and leveling, but the MACD about to cross lower. Follow the daily chart as the key. Should it fail below the trend line then expect support at 93 if the uptrend is to continue. Below that there is congestion down to 88. If it gets over the trend line near 101 then the key will be how it reacts at 104.82.

US Dollar Index Daily,$DX_F

US Dollar Index Weekly,$DX_F

The US Dollar Index pulled back slightly but found support at the 50 day SMA and finished the week only slightly lower. I’m not giving up on the Pitchfork until it cracks the 100 day SMA. Despite the recent run higher only the 20 day SMA is sloped positively and that only slightly. The RSI on the daily chart is finding support above the mid line but the MACD is diverging, falling lower. The weekly chart shows signs of slowing as it printed a Hanging Man candle this week, with the RSI crooking lower. The MACD though is improving and about to cross positive. Too many mixed signals outside of a one day view. The bearish view remains in tact until it can exceed the 100 day/20 week SMA at 76.59-.62 and retest the long rising uptrend resistance. Look for next week to continue higher but at a slower pace with a risk for a retracement back to the 74.80 area.

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

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

US Treasuries raced higher only to fall back to support at the 20/200 day SMA cross and finish the week slightly higher. The RSI on the daily chart rejected at 70 as price reached the top of the Bollinger bands and the MACD is following now about to cross negative. It printed a shooting star on the weekly chart, a bearish reversal indicator if confirmed. Notice that the volume on the weekly chart has been decreasing as it rises. But the RSI and MACD on the weekly chart show strength. Look for another test of the 96.30 area next week and if it can get through then resistance at 97.80 and a possible run at 100, as long as the 200 day SMA holds.

Shanghai Stock Exchange Composite Daily,$SSEC

Shanghai Stock Exchange Composite Weekly,$SSEC

The Shanghai Composite has been in a bear flag on the daily chart for three weeks, with the 200 day SMA providing support. All of the SMA’s are continuing to wind a round each other like a nasty knot. But the Bollinger bands on the daily chart are starting to pinch in and the MACD is about to cross positive. The weekly chart shows two consecutive doji with the RSI at the mid line and leveling, and the price just below the 20 and 100 week SMA’s, still in a symmetrical triangle bounded by eh 23.6% and 38.2% Fibonacci levels. Breathe. Look for the range bound price action to continue but with the coming week set up to be biased higher. If the 200 day SMA support fails though 2695 seems in the cards quickly

iShares MSCI Emerging Markets Index Daily,$EEM

iShares MSCI Emerging Markets Index Weekly,$EEM

Emerging Markets found support early in the week and rose, but the rise was short lived. The RSI on the daily chart points lower but the improving MACD offers another opinion. The weekly chart shows a slight move higher but still under the 20 week and 100 day SMA. Where the daily chart looks lower the weekly chart with its rising SMA’s and RSI stalling at the mid line looks more biased to the upside. Expect that the downside continues next week with a chance that it turns into consolidation above 46.

VIX Daily,$VIX

VIX Weekly,$VIX

The Volatility Index continued its tight range this week finishing higher but still below 18. The RSI on both the daily and weekly chart shows the flat line continuing. The MACD on both give no guidance either. And now the SMA’s are almost like flat resistance levels on the daily chart. Look for volatility to continue in a tight and low range between 15.50 and 21.25 for the coming week.

SPY Daily,$SPY

SPY Weekly,$SPY

The SPY moved lower to start the week but found support at the 50 day SMA bouncing higher, only to hit resistance at the 20 day SMA and fall back on Friday. The RSI on the daily chart has been bouncing along the mid line but with lower and lower highs on each bounce. The price has also been making lower and lower highs as well as two consecutive lower lows. The weekly chart shows two consecutive doji candles just above the 20 week SMA and at the rising trend line with an RSI that is rolling lower and a MACD that is slightly negative. Expect the SPY to head lower next week and if the weekly trend line cannot contain it as support near 131.12-.52 then a move lower to test 130 again.

IWM Daily,$IWM

IWM Weekly,$IWM

The IWM had the same pattern moving lower to start the week but finding support at 81.57 support/resistance level and bouncing higher, only to hit resistance at the 20 day SMA and fall back on Friday. The RSI on the daily chart has been trending lower as it bounces. The price has also been making lower highs as well as two consecutive lower lows. The weekly chart shows two consecutive doji candles just above the 20 week SMA and at the rising trend line with an RSI that is moving lower and a MACD that is crossed negative. Expect the IWM to head lower next week and if the 81.57 support/resistance line cannot contain it as support then a move lower to test 80.40 and 79.10.

QQQ Daily,$QQQ

QQQ Weekly,$QQQ

The QQQ had the same pattern moving lower to start the week but finding support at the 50/100 day SMA and bouncing higher, only to fall back on Friday. The RSI on the daily chart is hovering around the mid line. Price has made a lower low and now a lower high. The weekly chart shows a move lower to the 20 week SMA, confirming the doji candle from last week, and just above the rising trend line with an RSI that is moving lower and a MACD that is slightly negative. Expect the IWM to head lower next week and if makes a lower low below the 100 day SMA then a move lower to test 56.00 and the support/resistance line at 54.26.

So the coming week looks like a move higher for Gold but more downside for Crude Oil. The upside path looks to continue for US Treasuries but there is chance of a pullback for the US Dollar Index. The Shanghai Composite looks to reverse higher but not drastically with the Emerging Markets continuing lower or consolidating. Volatility looks to remain in check. The Equity Index ETF’s all look lower but like last week they will look to the QQQ for leadership to try to pull them higher, with the SPY and IWM looking weakest 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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