Tuesday, August 31, 2010

From the Charts: Macro Month in Review/Preview

Saturday night I reviewed the macro market indicators for the week. It looked then that we would see stronger prices for Gold and Oil and a continued pullback in US Treasuries. I suggested that US Dollar Index was in a range and although volatility was falling, that it would not be a catalyst for equities to break their range. So far this week Treasuries and Oil are bucking that analysis, heading higher and lower respectively, while Gold, the US Dollar Index and equities are behaving as expected.

Tonight being the end of August we get to add another data point and broader perspective from adding the insights of the monthly charts. Let's take a look.

Gold Monthly
Gold printed a bullish engulfing candle this month, pointing to higher prices to come. It remains in a broad rising channel. All of the Simple Moving Averages (SMA) are strongly rising. There is resistance at 1265, and support below at 1226 then 1122 lower. This has more upside room.

West Texas Intermediate Crude Monthly
Oil on a monthly basis remains in a range between 67.70 and 80.00, but looks to test the low end. It printed a bearish candle this month but is above support of the rising 20 month SMA. The Moving Average Convergence Divergence (MACD) is falling and about to cross, boding lowing prices, and the Relative Strength Index (RSI) is also negatively sloped. There is support lower at 60.55 and resistance at 77.25, the 50 month SMA, and then above the range at 88.50.

US Dollar Index Monthly

The US Dollar Index printed a hammer candle, bullish, on support of the 20 month SMA at 81.30. It is within a symmetrical triangle that could take some time to resolve. There is more support lower at 80.43 as well then the bottom of the triangle at 75.50. Resistance shows up first at 85 and then 86.50.

iShares Barclays 20+ Yr Treasury Bond Fund Monthly
TLT, my proxy for US Treasuries, is in the midst of a bullish continuation since the Three Advancing White Soldiers pattern put in from April through June. Resistance above is at the 113.70 top from December 2008 and January 2009. Volume has been trending higher and the MACD shows a positive future. Support on a pullback can be found at 101 and then 100.

VIX Monthly
The Volatility Index became less volatile as all the SMA are converging. There is support at both the 100 and 200 month SMA's between 21.19-21.60 and near 17.50 below that. Resistance comes first at the falling 20 month SMA, 29.07 then 35. It looks to be settling in to a smaller range as long as the SMA's keep converging.

SPY Monthly
The SPY printed a bearish Dark Cloud Cover pattern this month, where the monthly candle started higher and ended lower retracing more than 50% of the up move from the previous candle. The MACD is rolling over and the RSI also pointing lower. There is support lower at 103 then 98.62, and resistance at 107.12, the 100 month SMA and then 108.09 the 50% Fibonacci retracement level followed by 111.75.

IWM Monthly
IWM is more bearish than SPY, printing a bearish engulfing candle this month, after testing the 66 resistance line and failing. There is support at 60 and then at 58.21. Resistance comes first at 62.50 before the 66 level.

QQQQ Monthly
The QQQQ shows a flag after falling from the double top at 50 - 50.65 illustrated above. It also printed a bearish Dark Cloud Cover candle, just above support of the 50 month SMA at 42.16. There is further support at 40.22 below. The 46.50 - 47 range will be the first resistance on an up move. The MACD and RSI point lower for this as well.

In summary, Gold, US Treasuries and the US Dollar Index look strong on the monthly charts. Oil looks to test the bottom of a range. The Volatility Index seems to be settling with the tightening SMA's and the Equity ETF's are poised to move lower. This monthly view supports a continuation of the action seen so far this week.

Trade'm well!

1 comment:

  1. You are right. Equities look bearish going forward. Read another article where they said 1040 in the S%P has been a strong support level. Although if you look at it from a supply and demand level, the more times that level is hit, the easier it becomes to breach that level. I see equities going down further.