Thursday, August 5, 2010

From the Charts: Macro Week in Review/Preview 8/7/2010

The week began looking to bring stronger prices for Gold and Oil. The US Dollar Index looked to be headed to the woodshed for a further beating and US Treasury Bonds might drift to the top of their range. Less volatility in the volatility index and a weaker dollar looked to make it easier for stocks to rise and test their 100 day SMA's (last week's summary/preview). Equities did test the 100 day SMA but could not meaningfully pierce it despite the VIX heading lower. Gold did rise and the dollar did continue to get beat up. Oil and bonds were a little more quirky but behaved broadly as anticipated. Let's look at the details:

Gold Daily

Gold Weekly

Gold pierced the 100SMA on Tuesday then never looked back pushing through the 20 SMA and touching the 50SMA Friday at 1211 before a slight pullback. 1211 will continue to be resistance, with 1241 a big resistance area above that. 1200 will act as support with the 20/100SMA area at 1189 further support below that. The weekly chart confirms the direction is higher now, adding a resistance point at 1225, and showing some support at 1192 then 1175.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly

Oil broke out of the box Monday with a strong move up and initial test of 82, the top of the 76-82 range it has been in. After pushing through on Tuesday it could not hold 82 as support through Friday and fell back into the range. 82 will continue to act as resistance, with 79.50 and then all SMA as support lower, until the bottom of the 76-82 channel. The weekly chart shows the short term direction is higher, as it held above the weekly SMA's and rose this week. Support in the weekly chart comes at 79.50 then 20/200/50 week SMA's between 76.76 and 78.25. Resistance shows up at 85 then 87.50. Expect another test of the 82 channel top.

US Dollar Index Daily

US Dollar Index Weekly

The chart for the US Dollar Index looked ugly Monday and just kept getting worse. Friday saw it lose the 200 day SMA and hoping for support at 80 from April or the stronger 79.50 area. This 79.50-80 area is the key to future direction, but it looks lower still. If this area holds, resistance comes first at 80.68 then 81 and 81.50. The weekly chart shows it is holding onto support at the 50/200 week SMA cross near 80. The 79.50 support area from February through April would give way to 78 as support lower and then 77.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly

The long bond ETF tested 100 immediately on Monday, consolidated throughout the week then retested the 100 area on Friday. This week confirmed the importance of the 50 day SMA as support, currently at 98.46. Moving to the weekly chart more clearly confirms that TLT is in a range between 98.50 and 102. Expect this continue near term.

VIX Daily

VIX Weekly

The Volatility Index, VIX, printed a series of bearish engulfing candles, where the body of today's candle completely covers body of he previous day's candle, this week which bodes for lower levels to come. It is still elevated by historical standards. The weekly chart shows the trend down more prominently. Support comes at 20 and then 18 below that, with resistance first at 22, and 23.40 and 25.

SPY Hourly

SPY Daily

SPY Weekly

The hourly chart for SPY shows the tone of the market for the past week: wait and see what happens with the Friday employment report. The energy created by the tight trading range Monday through Thursday between 111.75 and 113 was then released on Friday with a downside test of the 200 day SMA at 110.93 before rising back to close in the range on strong volume. The importance of the 200 day SMA as support was confirmed otherwise a whole lot of action yielding nothing, unless you area a day trader. This is reflected in the daily chart and summed up in one word, indecision. On the daily chart the 200 day SMA is support at 110.93 with 110.20 below that. Resistance is first at 113.20, the mid-June high. The weekly chart points to a positive future. On the weekly it broke and held the 20wk SMA at 111.85, and sees resistance at 113.20 and then 114.67, with support lower at 109.38.

IWM Daily

IWM Weekly

IWM showed the same pattern of a tight trading range Monday through Thursday but did not respond as well to the downside energy release Friday, failing to re-enter the range. It did confirm the 200 day SMA as strong support as it held 63.85 then rose and held 65. Still, 66.63 the 100 day SMA is resistance, so a range between the 100 day SMA and 200 day SMA exists causing some indecision on the next direction. Again the weekly chart looks more positive. IWM probed above the 20wk SMA at 66.29 but could not hold it. Another push will see resistance higher at 67.50 and 64.68 acting as support lower with 62.86 below.

QQQQ Daily

QQQQ Weekly

The Q's were the strongest of the index ETF's this week. After the same tight trading range Monday through Thursday it retook, and held above the 100 day SMA at 46.68. Resistance higher is at 47 then 47.80 with support below the 100 day SMA at 45.75. Still a pretty tight range with some indecision about the next direction. On the weekly chart QQQQ rose above the 20 week SMA at 46.46 and held. It also looks more positive on the weekly timeframe. Resistance comes at 47.80 and support at 45.90 then 44.71 from the weekly charts.

So going into next week Gold looks to be going higher, and Oil despite ending the week weaker is showing strength as well. The US Dollar Index needs life support and hopes to get it in the 79.50 to 80 range, and bonds remain in a range. The major equity index ETF's SPY, IWM and QQQQ all are showing indecision shorter term but are pointing higher on the weekly charts, near the 100 day SMA as resistance. With the volatility index looking lower, perhaps they can punch through.

There will be no Top 10 Trade Ideas put out this weekend due to my vacation, but it will return next week. I will be reviewing the sector SPDRs Sunday night and getting back into the individual names starting Monday. Have a great week trading!

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