by Greg Harmon
Last week’s review of the macro market indicators looked like the unofficial last week of Summer would bring Gold to bounce around in its uptrend while Crude Oil slowed at resistance and turned lower. The US Dollar Index seemed content to move sideways while US Treasuries were biased lower. The Shanghai Composite and Emerging Markets were biased to the downside with risk of the Chinese market running a little higher first. Volatility looked to remain elevated keeping the bias lower for the equity index ETF’s SPY, IWM and QQQ, despite the moves higher the previous week, with the QQQ looking to have the best chance to break the bear flags higher.
The week began with Gold meandering sideways and Crude Oil hitting the breaks at resistance. The US Dollar Index was behaving as anticipated but US Treasuries were finding some support. The Shanghai Composite drifted lower while Emerging Markets caught a bid and moved higher. Volatility tailed off but only marginally as the Equity Indexes SPY, IWM and QQQ rose. And then Friday happened pushing Gold and Bonds higher and Crude Oil and Equities lower. What does this mean for the coming week? Lets look at some charts.
Gold Weekly, $GC_F
Gold spent most of the week building an ascending triangle under resistance of 1840 before launching over it on Friday to resistance near 1875. The daily chart shows a Relative Strength Index (RSI) that held well over the mid line and is moving higher and a Moving Average Convergence Divergence (MACD) indicator that is about to cross positive. The weekly chart remains bullish with upward sloping Simple Moving Averages (SMA), a MACD that is increasing and a RSI that remains high. The only concern about more upside in these charts is that the weekly RSI is over 80, and volume has been decreasing, but not a reason to sell. The triangle break has a target of 1930 with resistance at 1900 along the way. Look for Gold to head toward that target and possibly beyond in the coming week to the Measured Move (MM) of 2225 if it gets over 1940. Any pullback should find support at 1840 and 1800 below that.
West Texas Intermediate Crude Weekly, $CL_F
Crude Oil found resistance at the long term support/resistance line at 88.50 and fell back Friday. The RSI on the daily chart is now rolled lower and pointing down and the MACD is starting to fade. The SMA’s have been successively rolling lower also with only the 200 day SMA left. The weekly chart reinforces the rejection with the rising resistance line, but shows both the 100 and 200 week SMA as support underneath. The RSI on this timeframe has been trending lower but currently cricked higher, while the MACD is negative but has been flat. Look for Crude to continue lower next week toward support at 84. A move below 81 would trigger the next leg down with a target of 77. Any move above 88.5 will find resistance at 90.
US Dollar Index Weekly, $DX_F
The US Dollar Index broke higher above the descending triangle with in the 73.50 to 76 channel this week. It has a RSI on the daily chart that is rising and a MACD that has crossed positive, both suggesting more upside to come. The weekly chart is more middle of the road looking with the range in tact and the RSI shuffling along just below the mid line while the MACD stays near zero as it moves one week closer to the first Fibonacci fan line. Look for the Index to spend time in the top half of the channel next week. Any move over 76 should find resistance at 77.50 and a move below 73.5 support at 73 and 72.
iShares Barclays 20+ Yr Treasury Bond Fund Weekly, $TLT
US Treasuries, as measured by the ETF $TLT, consolidated higher for most of the week before breaking to new highs on Friday. The RSI is in bullish territory and currently rising while the MACD has moved back to the zero line and looks ready to cross higher, on the daily chart. The weekly chart shows a strong white candle closing nearly on the high in a bull flag. The RSI is elevated but not extreme at 77.17 and the MACD continues to increase. Look for more upside in Treasuries next week with targets higher on a MM to 120.70 and then 137 from the symmetrical triangle pattern breakout on the weekly chart. Any downside move should find support before 104.80 at either 108 or 106.
Shanghai Stock Exchange Composite Weekly, $SSEC
The Shanghai Composite is in a bear flag or continuation symmetrical triangle and moved lower in it this week. The daily chart shows the RSI indicating for more downside with a MACD that is rather flat. The weekly chart shows the flag is right at the 50% Fibonacci level of 2571 form the move up from 2008 to 2009. The RSI is heading lower and the MACD is flat on this timeframe. Look for more downside in the coming week with support lower at 2500 and then 2450. A break below that leads to a test of the 61.8% Fibonacci at 2357 and a target on the MM lower at 2260. Any upside surprise should find resistance at 2590 and then 2695-2700.
iShares MSCI Emerging Markets Index Weekly, $EEM
Emerging Markets, as measured by the ETF $EEM, made a move higher early in the week only to be contained by what might be the beginnings of a symmetrical triangle as resistance and close lower Friday. The RSI met the mid line and rejected lower while the MACD peaked and is now waning on the daily chart, with all of the SMA’s sloping lower. The weekly chart shows the reach higher with the long shadowed candle but unable to hold over the 42.54 support/resistance level. The RSI is suggesting upside on this timeframe and the MACD is starting to improve. The path in the short run looks lower with any upside contained at 42.54 with a hold over that level leading to a shift in thinking. Next week support comes at 39 and a break below that puts a move to to support at 35.91 on the way to a MM at 32 into play.
VIX Weekly, $VIX
The Volatility Index pulled back but held support at 30 before rising to close the week. The RSI on the daily chart bounced higher after hitting the mid line and the MACD peaked negative and is now improving. The weekly chart has the RSI falling and the MACD starting to move back toward zero. Divergence between timeframes. Look for volatility to remain elevated relative to the first 7 months of the year but a move below 28 could change that quickly. Conversely a move over 38 should lead to a retest of the 44 to 48 range. Look for more in the 28 – 38 range next week.
SPY Weekly, $SPY
The SPY rose early in the week but fell hard Friday after printing a Tweezers Top with topping tails halting at the 20 day SMA. The RSI on the daily chart turned lower at the mid line and the MACD is waning. On the weekly chart the long upper shadow may be foreshadowing more down side out of the bear flag. The RSI however is rising off of the low and the MACD is improving on this time frame. The trend is lower and look for that to continue next week with any upside move held at 121.50 or 123.40 above that. Any more and the down trend is in question. To the downside if support at 112.4 does not hold then the next levels down for support come at 111.15 and 104 on the way to the MM target of about 95.
IWM Weekly, $IWM
The IWM rose early in the week but also crashed Friday after printing a topping tails at the 38.2% Fibonacci retracement of the move lower, halting under the 20 day SMA. The RSI on the daily chart turned lower at the mid line and the MACD is waning. On the weekly chart the long upper shadow at the extended neckline of the previous inverse Head and Shoulders is showing more down side out of the bear flag. The RSI is rising off of the low but cricking back down and the MACD is improving on this time frame. The trend is lower for next week with any upside move held at 71.60 or 73.60 above that. Any more and the down trend is in question. If the downside support at 65 does not hold then the next level down for support comes at 62.8 on the way to the MM target of about 48.
QQQ Weekly, $QQQ
The QQQ also rose early and fell hard Friday after a Tweezers Top with topping tails at the 50 day SMA halting just above the 20 day SMA. The RSI on the daily chart turned lower under the mid line and the MACD is waning. On the weekly chart the long upper shadow may be foreshadowing more down side out of the bear flag. The RSI however is rising off of the low but cricking lower again and the MACD is improving. The trend is lower for next week with any upside move held at 54.26 or 55.50 above that. Any more and the down trend is in question. if the downside support at 50.00 does not hold then the next levels down for support come at 48 and 46 on the way to the MM target of about 40.
Next week looks like the moves that revealed themselves Friday will continue. Gold and US Treasuries are ready to continue higher. Crude Oil looks poised to drop further and the US Dollar Index to move sideways in the top of its range. The Shanghai Composite and Emerging Markets look to continue lower. Volatility looks to continue elevated with the US Equity Index ETF’s SPY, IWM and QQQ ready to continue lower in their bear flags. US Treasuries breaking out and Gold racing higher again could be the catalyst for a break of the bear flags lower. Use this information as you prepare for the coming week and trade’m well.