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Last week’s review of the macro market indicators looked for Gold and US Treasuries to continue their moves higher this coming week, with Crude Oil and the US Dollar Index continuing lower. The Shanghai Composite looked to consolidate further in the middle of its range while Emerging Markets did the same at the upper end of their range. Volatility looked biased to the upside contributing to the view that Equity Indexes, SPY IWM and QQQ will continue lower. All look to remain within their ranges of the last 6 months with the QQQ remaining the strongest much higher in its range. News driven breaks to the upside should be contained in that range with the possible exception of the QQQ’s.
The week played out a lot like anticipated with Gold and Treasuries rising. Crude Oil fell out of bed but the US Dollar consolidated before moving higher late in the week. The Shanghai Composite did consolidate further but Emerging Markets took their cue from global markets and sold hard. Volatility moved higher as Equity Indexes fell throughout the week, ending with the SPY, IWM and QQQ all breaking their 6 month ranges lower. What does this mean 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 Weekly, $GC_F
Gold made a strong move higher this week tagging 1685 before showing some signs of exhaustion with the topping tails on the candles late in the week. The Relative Strength Index (RSI) remains strong above the 70 line, but not extreme, and the Moving Average Convergence Divergence (MACD) indicator remains positive on the daily chart. The weekly chart shows an approach of the 1675 resistance line with rising volume, a rising RSI and a rising MACD. All is positive on this time frame. Look for Gold to continue the uptrend, but with the influence of the daily chart leading to some consolidation and perhaps a pullback on a short term basis. A pullback should find support at 1620 or 1600.
West Texas Intermediate Crude Daily, $CL_F
West Texas Intermediate Crude Weekly, $CL_F
Crude Oil continued its move lower, accelerating mid week to fall back into the mid 80′s. The daily chart closed with an RSI that fell below the 30 technically oversold level but with a MACD that was increasing to the downside. It broke through the 88 support/resistance on big volume, and could not retake it, printing a long legged doji out of the Bollinger bands. The RSI on the weekly chart shows that it has a lot of room left to fall and the MACD is just getting started back lower. Look for Crude Oil to be capped to the upside at 88 next week with a move lower to test 81 or possibly consolidation in the 84 to 88 range.
US Dollar Index Daily, $DX_F
US Dollar Index Weekly, $DX_F
The US Dollar Index continued its bear flag early in the week before moving higher Thursday. The daily chart shows the MACD crossed up and the RSI rising, both suggesting further upside. The weekly chart is also turning positive. The RSI on the weekly scale has turned up again and the MACD remains positive. Notice that it is right at the 74.80 support/resistance line again though, perhaps even a broad bear flag on the weekly timeframe between 73 and 76. Expect more of the same next week in that 73-76 range, with a bias to the top side of the range. A break above 76 has resistance at the 3 year uptrend resistance line at 77.3, and a break below 73 is disaster with support at 72 and the all time lows near 71.50.
iShares Barclays 20+ Yr Treasury Bond Fund Daily, $TLT
iShares Barclays 20+ Yr Treasury Bond Fund Weekly, $TLT
Treasury Bonds, as measured by the ETF TLT, continued their break out of the consolidation range from last Friday and vaulted higher to previous resistance at 105. The Tweezers Top at the end of the week and sharp sell off in the afternoon Friday suggest a further retreat. With the large two day volume a potential blow off top. The falling RSI and waning MACD on the daily timeframe concur. The weekly chart shows that the top rail of the symmetrical triangle did not thing to stop the advance although it nearly fell back inside by the Friday close. It is still outside of the upper Bollinger band on this timeframe. The RSI and MACD on the weekly chart support more upside but with the long shadow, resistance of the symmetrical triangle, and super-sized volume, look for the short term effects of the daily chart to take over in the short run pulling it back lower next week. It should find some support at the middle channel of the triangle at 97.30 if not at 100 first.
Shanghai Stock Exchange Composite Daily, $SSEC
Shanghai Stock Exchange Composite Weekly, $SSEC
The Shanghai Composite continued its bear flag, finally falling out of it lower on Friday. The daily chart shows a RSI approaching the technically oversold area and the MACD steady negative. All of the Simple Moving Averages (SMA) are turning lower again. The weekly timeframe looks bearish with a Three Black Crows pattern lower. The RSI and MACD support more downside on the weekly timeframe as well. Look for more downside with support at 2590 and then 2500 in the coming week, the bottom of the broad range between the 23.6% and 50% Fibonacci levels on the weekly chart.
iShares MSCI Emerging Markets Index Daily, $EEM
iShares MSCI Emerging Markets Index Weekly, $EEM
Emerging Markets, as measured by the ETF EEM, took a nosedive this week before bouncing Friday morning. The RSI on the daily chart is now at levels it has seen only 3 times in its 8 year life. Each previous time this level led to a major rally. This also has signs of a blow off with large sell volume on the steep move down and the long tailed Hammer candle Friday. The weekly chart shows that it found support for the week at the breakout level from mid 2010 after a year of consolidation. The RSI on this timeframe suggest more downside and the MACD has just crossed lower. This combination suggests a pause or move higher early next week before a continued move lower.
VIX Daily, $VIX
VIX Weekly, $VIX
After weeks of creeping slowly higher in a stable range, the Volatility Index broke higher this week, spiking near 40 on Friday. The RSI and MACD on the daily timeframe continue to support rising volatility going forward, although the RSI has historically pulled back at these levels. The weekly chart shows the break is currently lower than the last break up from April 2010, continuing the lower highs and creating a descending triangle. The RSI from the weekly chart is not over 790 yet but notice the reaction to that level the last two times it got there. Look for any further spike in Volatility to be contained at the previous weekly high at 48 and the long shadows suggesting a pullback in the coming week.
SPY Daily, $SPY
SPY Weekly, $SPY
The SPY took the elevator down as they say, dropping over 10% at its worst. The daily chart shows the move lower accelerating after it broke the neckline of the Head and Shoulders top where it intersected the bottom of the six month consolidation channel. The RSI on the daily chart is now under 25, getting oversold, and the MACD is very high. There was a large volume run up on the move lower and it is now out of the Bollinger bands for 3 days. Finally all of the SMA’s are sloping lower. The weekly chart shows a touch near the 100 week SMA with a RSI that is pointing lower and the MACD starting to grow more negative. The SPY looks to head lower but with the quick and steep decline out of the Bollinger bands there is a good chance of consolidation or a bit of a reversion higher before it continues down. Look for 124 or 126 to contain any up move and an eventual target of 114-116 at least, and below that 111.
IWM Daily, $IWM
IWM Weekly, $IWM
The IWM also accelerated lower, dropping over 13% at its worst. The daily chart shows the move lower accelerating after breaking the support/resistance line at 76.65 which had been the bottom of the six month consolidation channel. The RSI on the daily chart is now under 22, getting oversold, and the MACD is very high. There was a large volume run up on the move lower for IWM as well and it finished out of the Bollinger bands for 2 days. Finally all of the SMA’s are sloping lower. The weekly chart shows a touch near the 100 week SMA with a RSI that is pointing lower and the MACD starting to grow more negative. The IWM looks to head lower as well but with the quick and steep decline out of the Bollinger bands there is a good chance of consolidation or a bit of a reversion higher before it continues down. Look for 74.25 or 76.75 to contain any up move and an eventual target of 66 at least, and below that 63.
QQQ Daily, $QQQ
QQQ Weekly, $QQQ
The QQQ also marched lower, dropping nearly 11% at its worst. The daily chart shows the move lower broke the support/resistance line at 54.26 and then below the bottom of the six month consolidation channel at 53.50, but unlike the SPY and IWM, it retook that channel. The RSI on the daily chart is still over 30, but the MACD is very high. There was a large volume run up on the move lower and it also finished out of the Bollinger bands for 2 days. Finally the SMA’s are flat, with only the shortest rolling lower. The weekly chart shows a touch below the 50 week SMA with a RSI that is pointing lower, but not making a new low, and the MACD starting to grow more negative. The QQQ looks to be the strongest of the Index ETFs, with potential to hold support if the Hammer Friday can be confirmed. With the quick and steep decline out of the Bollinger bands there is a good chance of consolidation or a bit of a reversion higher next week. Look for 55.50 r 56 to contain any up move and any close under 53.50 to lead to a move lower with a target of 52.5 and eventually 50-50.50 below that.
Next week will be interesting on many levels. Gold appears ready to consolidate, if only for a couple days within the uptrend while Oil may consolidate before continuing the fall. The US Dollar Index looks to drift higher in the 73 to 76 range while US Treasuries pullback. The Shanghai Composite appears headed lower toward support and Emerging Markets may consolidate or bounce a bit before doing the same. The spike in Volatility looks to have more room to the upside but shows signs of pulling back at least early in the week. The Equity Index ETF’s SPY, IWM and QQQ appear set to bounce early next week, but the SPY and IWM charts look broken on many timeframes and headed lower. The QQQ is a bit of an enigma as it has maintained a hold at support. The QQQ’s continuing to hold and move higher would be a signal that the broad downturn may be ending. On the other hand if the SPY and IWM continue lower as expected in the intermediate term the QQQ will likely join them lower. 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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