Friday, August 27, 2010

From the Charts: Macro Week in Review/Preview August 27, 2010

Coming into this week the market looked to bring stronger prices for Gold and the US Dollar Index with US Treasury Bonds trying to join the party. Oil still looked broken and on a path lower. And a rising volatility index combined with that stronger dollar looked to continue to press stocks lower. This played out as expected early in the week with with Gold and the Dollar Index rising and US Treasuries hitting new low yields, thus higher prices. Stock indexes and Oil did run lower. Mid week Oil found a bottom and Bonds and the Dollar Index a top but Gold just kept strong. Equities were bounced around Thursday and Friday by data and speeches but remain lower for the week. What does next week hold? Let's go to the charts.

Gold Daily

Gold Weekly

Gold had a good run this week and looks ready to go higher still. After a quick hard test of the 100 day SMA on Tuesday, it rallied Wednesday and held there with a couple of doji days the rest of the week, within the consolidation channel between 1233 and 1245 from the May - June time-frame. 1255 is the next resistance area from the highs in late June. The weekly chart shows that the trend remains higher after the test of the channel and 20 week SMA a little over a month ago. Support comes at 1210-1215 area from the daily chart and 1206 lower from the weekly.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly
Oil put in a reversal this week that looks to continue into next week. This is seen in both the daily and weekly charts. The daily chart shows the rally Friday broke through and held the 74.80-75 resistance area. The candle with virtually no upper shadow shows that after testing the 72 support area the bulls were in charge the rest of the day right into the close. There is some resistance at 76 then the confluence of SMA's between 76.90 and 77.94. The weekly chart printed a bullish hammer candle after testing near the strong support around 71 from December, February and May through June. Resistance can be seen at the meeting of the 20, 50 and 200 week SMA's between 77.00 and 77.67.

US Dollar Index Daily

US Dollar Index Weekly
The US Dollar Index may be resting or have found a short term top. The daily and weekly charts conflict slightly on this one. The daily chart shows the index being pushed down by the 50 day SMA, but in a fairly narrow range flag with 82.50 there to help as support and the 20 day SMA at 82.04 lower. A break below 82.04 would signal a top was put in. The weekly chart shows the bullish flag above the 82.25 support area with 83.88 as resistance higher. A break through the 50 day SMA would signal a move higher.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly
Treasury Bonds, using TLT as a proxy, may not be dead but are badly wounded and the beating looks to continue going into next week. The daily chart shows a fall out of an expanding rising wedge that accelerated after it broke the wedge support and strong volume. There is some support at 105 and then 104 below before the gap fill support at 102.67. The weekly chart shows a shooting star or an evening star or inverted hammer candlestick depending upon who you study. Whichever one you choose it is very bearish with the shadow being more than 10 times longer than the real body! Support on the weekly chart comes at 104 and then 102. Should the world look like it was going to end and everybody wanted Treasuries, 109.50 would be resistance, but I think pigs fly first.

VIX Daily

VIX Weekly
The Volatility Index, VIX, remains elevated by historical standards but in a range between 22 and 30 which looks likely to hold next week. The daily chart has recently defined that range between 22 and 28.41 and this week has been heading towards the bottom of the range. The weekly chart shows the 20, 50 and 200 week SMA's creating a boundary between 24.45 and 27.22. If it breaks out higher 32.58 would be resistance.

SPY 60 minute

SPY Daily

SPY Weekly
Moving to the equity index ETF's, SPY continued to trade a fairly narrow range this week. The 60 minute chart illustrates all the points of resistance and support in the range between 104.18 and 110.50. It is also interesting to see that the downward sloping trend line, which extends back to the mid-May highs near 117 is still occasionally playing a role. Most interesting is the support that appeared at 105 this week despite a couple brief dips to the 104.30 area. The daily chart shows a bullish hammer candle Friday but also resistance at 107.10 and then all the SMA levels higher as well as that 104.30-105 support area lower. The weekly chart also printed a bullish hammer within the range of the flag that has been waving since late May. Resistance on the weekly comes from the 20/50 week SMA area, between 109.74 and 110.37, near the top of the range illustrated in the 60 minute chart. Although the SPY looks bullish expect it to run into resistance quickly. It still in a range.

IWM Daily

IWM Weekly
The Russell 2000 ETF, IWM, also closed the week on a bullish note printing a hammer candle on the daily chart back above the 60.25 area that has been resistance/support. There is also plenty of resistance on this chart higher at 62.78-63.05 from the bearish 20/50 day SMA cross and then 64.15 above it. The weekly chart nearly printed a dragonfly doji (the inspiration for the company name), a very bullish formation. The 58.47 -59 support area stands out on this chart as it has been tested and held 3 times since February. The weekly chart also exhibits a lot of resistance points in a tight range above, from the 20, 50 and 200 week SMA's converging between 63.09 and 65.19. Although a bullish set of charts expect this to remain with in theses bounds this week.

QQQQ Daily

QQQQ Weekly
The Q's also ended the week stronger with a bullish hammer candle on the daily chart, which stopped just below the 44.25 resistance area. This too has many resistance points higher starting with the gap to 44.50 the 20, 50 and 200 day SMA's between 45.17 and 45.71 and the 45.75 top area from July and early August. Support lower continues to be at 43.50 and 42.50. The weekly chart also printed a bullish hammer, but at the same time lost the 50 week SMA. The 200 week SMA flat-lined at 42.44 is support and resistance at 45.89 and then 46.60 higher. This also appears to be in a range with the expectation for that range to continue this week.

So next week looks to bring stronger prices for Gold and Oil and a continued pullback in US Treasuries. Watch the range for the US Dollar Index to signal its next move. Although volatility is falling it remains with in a range and will have little impact on equities, which appear to have at least a slightly bigger pop in store for the week before hitting resistance, after a rough week this week. Good luck next week!

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