Macro Week in Review/Preview March 14, 2014

• Posted by Greg Harmon
• on March 14th, 2014

Last week’s review of the macro market indicators suggested, heading into the week that the equity markets looked positive. Elsewhere it looked for Gold to consolidate with an upward bias while Crude Oil remained on the short term upward path. The US Dollar Index looked weak and ready to move lower while US Treasuries were also biased lower in their consolidation zone. The Shanghai Composite and Emerging Markets were set up to continue their consolidations from the prior week with Emerging Markets holding an upward bias. Volatility looked to remain subdued keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts favored the upside as well, fairly strongly in the SPY and IWM and less so in the QQQ, with all at risk for a very short term intra-week pullback.

Well that did not work out very well. The week played out with Gold pushing higher (so far so good) while Crude Oil’s path turned lower. The US Dollar drifted slightly lower while Treasuries made a move higher to test the recent highs. The Shanghai Composite drifted lower and Emerging Markets broke down. Volatility became unhinged at the end of the week moving higher and closing near the highs. The Equity Index ETF’s just moved lower, also ending the week near the lows. 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 consolidation from last week to the upside and kept going. The daily chart shows it making a higher high, over that from October. That is a positive sign on this timeframe. The Relative Strength Index (RSI) is firmly in bullish territory with a MACD that is flat after a big rise. On the weekly chart the new high triggers a new Shark harmonic with a Potential Reversal Zone (PRZ) at 1425, also prior resistance. The RSI on this time frame is strong, bullish and rising with a MACD that is also rising. There is resistance right here at 1380 and then 1400 followed by 1425. Support lower comes at 1360 and 1320 followed by 1280. Continued Upside.

West Texas Intermediate Crude Daily, $CL_F

West Texas Intermediate Crude Weekly, $CL_F

Crude Oil took the bounce to end last week and converted it into a bear flag, breaking lower right out of the gate Monday. By Wednesday it had hit the Measured Move lower to 98 and consolidated there the rest of the week. With the RSI showing a turn higher to end the week be watchful for a reversal which would carry a Measured Move higher to 113 to complete an AB=CD pattern. For now the short term mood is down though, with the MACD heading lower. Out to the weekly view the doji last week was confirmed as a reversal lower with this week’s red candle. The Simple Moving Averages (SMA) are just below and may give support but the RSI is heading lower and the MACD is starting to roll lower. There is support lower at 98 and 96 folowed by 92. Resistance higher is found at 100 and 102 before 104.82. Downside But Looking for Support and Reversal

US Dollar Index Daily, $DX_F

US Dollar Index Weekly, $DX_F

The US Dollar Index continued lower, tagging the long term rising trend support with the long shadow Thursday. The daily chart shows a RSI hugging the 30 level, bearish, and the MACD continuing lower. On the weekly chart the trend is lower as well. The RSI on this timeframe is heading lower with a MACD that is falling. There is support lower at 79 and 78 followed by 74. Resistance higher comes at 80 and 80.60 with 81.20 over that. All Signs Point South.

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, took a couple of days to get going but launched higher to close near the previous highs. But, significantly, a lower high, as yet. The RSI is moving higher though and it has a MACD that is about to cross up on the daily chart, both supporting more upside. The last significant feature on the daily chart is a Golden Cross about to happen (50 SMA crossing up through the 200 SMA), also bullish. The weekly chart dampens this party a bit. The last 3 weeks consolidation under the blue resistance zone and stalling at the falling 50 week SMA gives a longer term trader pause to enter. The RSI on this timeframe is yet to move over 60 and establish a bullish zone with a MACD that is rising. It could get there, but is not yet. There is resistance at 109.25 and 110.50 and over that things turn very bullish. Support lower comes at 106.75 and 105 followed by 102. Consolidation with a Bullish Bias.

Shanghai Stock Exchange Composite Daily, $SSEC

Shanghai Stock Exchange Composite Weekly, $SSEC

The Shanghai Composite dove lower Monday and consolidated around the 2000 level the rest of the week. A move higher from here, establishing a double bottom, could occur, but for now it is just a test of the neckline of the Head and Shoulders top from below, with a target lower of 1875. The RSI on the daily chart shows a bounce off of the 30 level and a MACD that is falling, a downward bias. The weekly chart shows continuation lower from the Shooting Star 4 weeks ago. The RSI is turning back never having breached the mid line and the MACD is also moving lower avoiding a cross up. There is support at 2000 and 1950 followed by 1850. Resistance higher comes at 2065 and 2100. Consolidation with a Downside Bias.

iShares MSCI Emerging Markets Index Daily, $EEM

iShares MSCI Emerging Markets Index Weekly, $EEM

Emerging Markets, as measured by the ETF $EEM, declared last Friday’s candle an Evening Star reversal by moving lower Monday and then kept going. The daily chart shows a lower low breaking the range and a RSI and MACD both moving lower. These suggest the fall is not over. The weekly chart shows a full reversal and more from last week. The RSI moving lower after failing to reach the mid line and the MACD turning lower confirm that view and support more downside. There is support lower at 37 and 36 and under that it breaks a long broad consolidation channel, very bearish. Resistance higher comes at 38.50 and 39.80 followed by 40.30. Over that changes the mood. Continued Downside.

VIX Daily, $VIX

VIX Weekly, $VIX

The Volatility Index put on the turn signal mid way through the week. The RSI jumped from the mid line of the daily chart while the MACD bottomed and turned higher as the Index broke back above all the SMA’s. It finished near resistance at 18. The daily view looks higher. The weekly chart shows the bounce as well, and a finish under the 200 week SMA, that has stopped its rise since April 2012. The RSI on the weekly timeframe is rising and the MACD is still relatively flat. There is resistance above 18 at 22, and over that has been our trigger to start worrying about prolonged downside on the markets. Support lower stands at 15.67 and 12.40 followed by 10. Upside Bias.

SPY Daily, $SPY

SPY Weekly, $SPY

The SPY started the week with a Hanging Man that confirmed last Friday’s Hanging Man lower. Tuesday’s Bearish Engulfing candle confirmed them both lower and it continued lower the rest of the week. The small real body candle Friday, signalling indecision, could mean a reversal, but also could just continue lower. Confirmation is needed. The week ended at prior resistance from December and January, and closed the gap, so there is some basis for a reversal. The RSI continues to fall and point lower through as it cuts through the mid line and the MACD is moving lower after it crossed down Wednesday. These support more downside price action. The weekly chart shows an inside week, holding over the prior resistance level. But here as well the RSI is pointing lower (although in bullish territory) with a MACD that avoided a cross up and is reverting lower. Both support more downside. There is support at 184 and 181.80 followed by 180 and 177.75. A move under 173.75 would put the long term uptrend in jeopardy. Resistance higher comes at 185 and 186.75 followed by 188.96. Over that is a Measured Move targeting the 195-197 area and then much higher. Pullback or Consolidation in the Uptrend.

IWM Daily, $IWM

IWM Weekly, $IWM

The IWM headed into the week with an expanding top that confirmed lower Monday. The rest of the week continued down before a bounce Friday. The week ended bouncing off of prior resistance from January, and closed the gap, so there is some basis for a reversal here as well. The RSI may be turning and is holding above the mid line but the MACD is moving lower after it crossed down Wednesday. These support more downside price action, but watching for a reversal if the RSI continues higher. The weekly chart shows an inside week, holding over the prior resistance level. The RSI is pointing lower but strong with a MACD that avoided a cross up but is level. There is support at 117.10 and 116 followed by 114 and 111.70. A move under 108.50 would put the long uptrend in jeopardy. Resistance higher comes at 118 and 120.58 followed by a Measured Move targeting the 127 area and then much higher. Pullback or Consolidation in the Uptrend.

QQQ Daily, $QQQ

QQQ Weekly, $QQQ

The QQQ headed into the week with an expanding top that confirmed lower Tuesday. The rest of the week continued down. The week ended at the prior resistance from January. The RSI is falling and through the mid line with the MACD moving lower. These support more downside price action. The weekly chart shows an sharp move lower. The RSI is pointing lower but strong with a MACD that crossed down but is level. There is support at 88 and 86.50 followed by 84. A move under 84 would put the long uptrend in jeopardy. Resistance higher comes at 89 and 91.35 followed by a Measured Move targeting the 96 area and then much higher. Pullback in the Uptrend.

Heading into the March Options Expiration week and ahead of the widely expected invasion of the Ukraine the markets are jittery if not tired or weak. Specifically look for Gold to continue higher in its uptrend while Crude Oil slows in its pullback and may be ready to reverse higher. The US Dollar Index looks to continue lower while US Treasuries are biased higher and near a break of major resistance. The Shanghai Composite and Emerging Markets are biased to the downside with risk of the Chinese market consolidating and then a possible reversal. Volatility looks to remain low but moving higher cutting the breeze at the back of the equity index ETF’s SPY, IWM and QQQ. Their charts suggest that the SPY and IWM are a bit stronger than the QQQ and may be ready to consolidate and reverse higher, while the QQQ is biased lower. Use this information as you prepare for the coming week and trad’em well.

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