Macro Week in Review/Preview December 20, 2013

• Posted by Greg Harmon
• on December 21st, 2013

Last week’s review of the macro market indicators suggested, heading into the last full week before the Holidays, that the markets were looking tired and extended and better lower. It looked for Gold to continue lower while Crude Oil turned the bias to lower in the short term. The US Dollar Index was trending lower but might be ready for a bounce while US Treasuries were biased lower. The Shanghai Composite was consolidating in the upward move and Emerging Markets were biased to continue to the downside. Volatility lookeds to remain subdued but with an upward bias keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts suggested that there may be more downside for the QQQ and SPY, which were both at support, while the IWM crept along trend support higher in what could still be a bear flag.

The week played out with Gold falling hard before a bounce to end the week while Crude Oil made a higher low and recovered. The US Dollar did bounce after a wide range day while Treasuries held at the lows. The Shanghai Composite marched lower and Emerging Markets continued to flounder with a downward drift. Volatility made a strong move lower, reversing the last week’s rise. The Equity Index ETF’s reacted by finding support and with the SPY and IWM making new all-time highs intraday and the QQQ new 13 year highs. 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 broke the recent consolidation lower ending the week with a possible Double Bottom. I say possible because it is, but the Relative Strength Index (RSI) and the MACD both support further downside price action. The Simple Moving Averages (SMA) are all pointing lower as well. It would seem that any bounce would be short lived. The weekly chart shows that the bullish butterfly harmonic is in control and the target at 1120 before any reversal seems unphased. The RSI on this time frame is running lower and the MACD agrees as it rolls lower after a lower high. There is support lower at 1180 and 1140 before 1100 and 1045. Resistance on any bounce may be found at 1200 and 1220 followed by 1260. Continued Downside.

West Texas Intermediate Crude Daily, $CL_F

West Texas Intermediate Crude Weekly, $CL_F

Crude Oil broke a bull flag to the upside and continued higher. The daily chart now has a Measured Move higher to 102.50 and both the rising RSI, making a new higher high, and MACD support more upward price action. The weekly chart shows a move out of the brief consolidation after a bounce off of rising trend support two weeks ago. The 20 week SMA (also 100 day SMA) is just above and could bring some selling but the RSI is rising and breaking the id line, bullish, with a MACD that is just getting started higher and about to cross to positive. There is resistance higher at 100 and 104.82 as well with support lower at 98 and 96. Continued Upward Price Action.

US Dollar Index Daily, $DX_F

US Dollar Index Weekly, $DX_F

The US Dollar Index consolidated the bounce early in the week but then printed a Spinning Top, often cited as a reversal but technically an indecision candle, Wednesday with ginormous shadows. It confirmed higher and is testing the 100 day SMA. This has been a tough resistance level since the summer. It has support to break through higher from the rising RSI, on the verge of crossing into bullish territory and a MACD that has crossed and is rising on the daily chart. The weekly picture looks like it has some work ahead though. The Hammer candle confirmed the Hammer from last week as a reversal higher but has many SMA above to get through. The RSI on this timeframe is decidedly less bullish as it moves along under the mid line but tilting higher with a MACD that is level after a brief rise. There is resistance at 81.20 and 81.60 followed by 82 above and support lower at 80.60 and 80 followed by 79. The longer view shows that it is still very stable in the range between 78 and 85. On the shorter scale the impact is muted. Short Term Upward Bias.

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, spent another week pounding on support before a bounce on Friday to end higher. The move took it over the 20 day SMA, which has been an important resistance this year. But is has jumped the 20 day SMA before and failed in April and October. The daily chart shows the RSI breaking up through the mid line for a nearly two month high, and the MACD is slowly rounding higher. These support more upside. The longer SMA’s do remind that the trend has been and remains lower. the weekly chart shows the consolidation at the lows of the year with the RSI near 40, far from bullish. The MACD is trying to rise on this timeframe so maybe this is the reversal. There is resistance at 105 and 108 with a move above 108 confirming a reversal. Support lower is found at 102 and 100 with a move under 102 very bearish. Continued Consolidation in the Downtrend.

Shanghai Stock Exchange Composite Daily, $SSEC

Shanghai Stock Exchange Composite Weekly, $SSEC

The Shanghai Composite had a horrible week, and ended with an acceleration lower. The Marubozu candle Friday bodes for more downside as the RSI becomes technically oversold, under 30, and the MACD is driving lower. The SMA’s have been moving sideways generally and price has been reverting to them so a bounce here is not out of the question, as it touches the last low from November and the 50% retracement of the last major movement. The weekly chart shows the Deep Crab harmonic failing with a Marubozu candle on this timeframe as well. The 2260 level held again. The RSI on this timeframe is making a lower low as it moves through the mid line and the MACD is about to cross down, If these continue it could get ugly. There is support lower at 2065 and 2000 before 1960. Resistance should it reverse may be found at 2100 and 2145 before 2175 and 2200. Continued Downside.

iShares MSCI Emerging Markets Index Daily, $EEM

iShares MSCI Emerging Markets Index Weekly, $EEM

Emerging Markets, as measured by the ETF $EEM, continued in their downward channel ending the week near the previous November low. There is now a building trend support line which could halt the slide at 40. The RSI is drifting lower though along with the MACD both supporting more downside. The weekly picture also points lower. The RSI here is making a lower low and through the mid line with the MACD rolling lower and crossing down. There is support at 39 and 38 before the bottom of the long channel at 36. Resistance higher comes at 41 and 42.54 followed by 43.30. Continued Downward Price Action.

VIX Daily, $VIX

VIX Weekly, $VIX

The Volatility Index had an important week, ending back below the 20, 50, 100 and 200 day SMA’s. The red indications in the chart show that since the rally began in November each time the VIX has moved above all of these SMA’s and moved back lower, along with the MACD crossing down, the S&P 500 has made a new all-time high. Friday was the 8th time this has happened. he S&P has continued higher in the past until the MACD has subsequently crossed back higher. Watch for that. The MACD is falling now and the RSI is cracking the mid line on the daily chart. On the weekly timeframe the RSI continues to muddle around the mid line with the MACD flat and near zero giving no real signals. There is support at 12.40 and 10 and resistance comes higher at 15.67 and 18 followed by 22. I continue to see no issues with the VIX until it gets over 22. Continued Low Volatility.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY started the week with a small bounce off of the support area since early November only to accelerate following the Federal Reserve decision Wednesday and end the week at the top of the current range. Technically speaking it made a new all-time high on the intraday basis, actually showing great strength Friday as it has to overcome a 98 cent dividend to as well. The prognosis is positive as well with the RSI holding over 60, in bullish territory with a MACD that is moving higher and just about to cross, giving a buy signal. The weekly chart shows consolidation continuing for the 5th week at the high levels and a recovery of last week’s red candle with a bullish engulfing candle. The RSI on this timeframe is moving back higher and the MACD is avoiding a cross down, both supporting the upside. Notice that the SMA’s are all rising on both timeframes, also bullish. There is support lower at 180.40 and 178.50 before 177.50. Under that and we could get a pullback or correction. Resistance is at 181.99 now, Friday’s high, and then there are consolidation break targets at 186 and 190. Upward Bias with Continued Consolidation Possible.

IWM Daily, $IWM

IWM Weekly, $IWM

The IWM started the week continuing the bounce off of rising trend support line only to accelerate Wednesday and end the week at the top of the current range as well. It also made a new all-time high on the intraday basis. The prognosis is positive as well with the RSI rising over 60, in bullish territory with a MACD that is moving higher and crossed up. The weekly chart shows a recovery of last week’s red candle and the previous week’s. The RSI on this timeframe is moving back higher and the MACD is turning back up, both supporting the upside. Notice that the SMA’s are all rising on both timeframes, well spaced, very bullish. There is support lower at 113 and 111.65 before 110.45 and 109. Under that and we could get a pullback or correction. Resistance is at 114.22 now, Friday’s high, and then there are targets from a RSI Positive Reversal at 114.63 and a Measured Move to 116.34. Upward Bias.

QQQ Daily, $QQQ

QQQ Weekly, $QQQ

The QQQ started the week moving toward the 20 day SMA and then also accelerated Wednesday and end the week at the top of the current range as well. It also made a new all-time high on the intraday basis. The prognosis is positive as the is RSI rising in bullish territory with a MACD that is moving higher and about to cross up. The weekly chart shows a recovery of last week’s red candle with a bullish engulfing candle. The RSI on this timeframe is moving back higher and remains technically overbought but not yet extreme while the MACD is continuing to rise, both supporting the upside. Notice that the SMA’s are all rising on both timeframes, well spaced, very bullish. There is support lower at 85 and 84 before 82.50. Under that and we could get a pullback or correction. Resistance is at 86.68, Friday’s high, and 88.50 from 2000 and then there are targets at 88.13 and 89.29 Measured Moves higher. Upward Bias with a Dose of Caution.

Heading into the Christmas Holiday week, the markets have regained some strength. This week look for Gold to continue lower while Crude Oil keeps moving higher. The US Dollar Index is looking better to the upside while US Treasuries are biased lower but in consolidation. The Shanghai Composite and Emerging Markets are biased to the downside with risk of the Chinese market turning very ugly. Volatility looks to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their individual charts suggest more upside with the IWM looking strongest, followed by the SPY. The QQQ has a strong trend but remains a bit extended. Use this information as you prepare for the coming week and trad’em well.

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