Friday, September 17, 2010

From the Charts: Macro Week in Review/Preview September 17, 2010

The week began looking like Gold and the US Dollar Index might take a breather. US Treasury Bonds were on support but looked weak and headed lower. Although Oil was strong it was nearing layers of resistance which could take some time to work through. Volatility seemed to have found a bottom, although still weak, which would allow stocks to continue their move higher, towards a test of the top of the four month (or maybe one year) channel. I detailed this in the broad market trend reviewed Friday September 10th. The week started with a bang as the equity index ETF's went right to resistance on Monday and stayed there all week, except for the QQQQ which did not stop and is trying to drag the others higher. Gold and the US Dollar Index did rest for a couple of days before Gold started higher but the dollar broke lower and Treasuries started to lose their range lower. Oil did test the top of resistance and was smacked back hard. How does this set up for next week? Let's look at the details in the charts.

Gold Daily

Gold Weekly
Gold took Monday off then rocketed up to new highs on Tuesday, rested again Wednesday and created higher highs ending the week. With this move it now has support at 1270 and then 1255 and 1247.79 below. The weekly chart shows a continued move within the long upward trending channel through the 1255 area and onward now to the target of 1328. The Relative Strength Index (RSI) is indicating that it is getting a little overbought so it might rest again, but the trend and momentum is still higher. It wants more. This is re-enforced by the rising Simple Moving Averages (SMA's) and the positive Moving Average Convergence Divergence (MACD) on both the daily and weekly charts, with special notice to the MACD cross on the weekly chart.

West Texas Intermediate Crude Daily

West Texas Intermediate Crude Weekly
West Texas Intermediate Crude does not seem to want to join the party. Despite entering the week with positive technicals it tested the 200 day SMA and then rejected lower, as noted above, through the 50 ad 100 SMA's. With a bearish engulfing candle Friday it is hanging on support of 74.70, the 20 day SMA , by a thread with support lower at 72, and it looks weak. Should it bounce there is resistance at 75 and then the 76.22-.72 area followed by 77.76. A lot to work through to get back where it was on Monday. The MACD and RSI have also turned lower suggesting its upward run may be ending. Switching to the weekly chart, the consolidation continues below the SMA's with the 20 week SMA adding a negative bias as it crosses lower. Below the flag there is support at 71.19 and then 70. Should it break the SMA's higher there is resistance at 81.50.

US Dollar Index Daily

US Dollar Index Weekly
Speaking of weak, the US Dollar Index is the poster child. It fell right out of the blocks Monday and took another beating Tuesday. Since then is has created a bear flag with support at 81 and then 80.70 followed by 80. The weekly chart shows that it lost support at 82.08 and 81.63, the 100 week SMA. Both will now act as resistance. The MACD and RSI on the weekly chart appear very bearish. Should it miraculously rise from the dead, there is resistance at 81.72-82 and then 82.28-.44.

iShares Barclays 20+ Yr Treasury Bond Fund Daily

iShares Barclays 20+ Yr Treasury Bond Fund Weekly
My proxy for US Treasuries, the TLT, lost support of the 50 day SMA at 101.98 on Thursday and could not reclaim it. The bearish action within the positive candle Friday is also a sign of weakness. There is resistance higher near 103 from the upward trendline and 104.80 higher. the increasingly negative MACD and falling RSI suggest it is heading lower. Continued weakness sees support at 100 followed by 98.92. The weekly chart paints a similar picture with no new knowledge of support or resistance but a couple of key indicators to watch for. Fist this week's candle was a star signifying indecision so be nimble enough to react to a possible reversal. The MACD however is crossing lower and a falling RSI bode for more downside.

VIX Daily

VIX Weekly
There is not much to say about the Volatility Index. It has been in a range on both the daily and weekly charts for several weeks now between 21.25 - 28.4. the SMA's on both charts provide some resistance if the VIX were to move higher. Under the range the daily chart shows support at 18 and the weekly at 16.93.

SPY 60 minute

SPY Daily

SPY Weekly
The 60 minute chart shows clearly that the SPY is testing the 113.20 area for the third time in four months. RSI is falling but still near 50 and the MACD looks stable on this chart. It could go either way. There is support lower at 112.13-22 and then 111.68, and resistance above at 114.67 from May. Switching to the daily chart this week was a 5 day island gap up and is sitting against resistance at 113.25. Should it break through the next resistance is at 114.55. The MACD indicator is decreasing and the RSI is rolling over indicating that there may be a move lower. If so, support can be found at 112 followed by 111.28 and 110. The weekly chart printed a Doji star, signaling indecision, at the 113.26 resistance area. There is further resistance above at 114.67 and 115.38, and further support below at 110.26 then 109.20. There does not appear to be real power in either direction.

IWM Daily

IWM Weekly
The daily chart for the IWM shows a 5 day consolidation range between 64.50 and 65.50. It is slightly bearish as the real bodies became smaller Thursday and Friday and the shadows longer. But it did hold above the bearish 100 day 200 day SMA cross.The MACD is positive but starting to decrease and the RSI is flat lined. If it gets through 65.50 then resistance can be found at 66.50 and 67.25 higher. Support comes first at 64.52 and then 63.29. On the weekly chart IWM is up against resistance from the downtrend line 65.21. Resistance on a breakthrough comes at 70 higher. The tight SMA's act as support below as well as 58.68. The weekly shows the MACD crossing higher and the RSI rising giving it a slight bullish bias. Taking both the daily and weekly charts into account there is not a clear bias in either direction here either.

QQQQ Daily

QQQQ Weekly
The QQQQ is the anomaly in the Index ETF space. It had a strong gap up move Monday and kept going. Have broken and held the long term support/resistance level near 47.80 it is now ready to test the 48.50 May highs with resistance above that at 50.10. The RSI is only approaching being overbought near 70 and the MACD is positive but may be waning. The one bearish glimpse is the solid black candle indicating a bearish day Friday with in the up move, starting at the high and closing lower, also creating a bearish Hanging Man. If it falls then support can be found at 47 and 45.75-.90 lower. The weekly chart shows it at resistance of 48 from September 2008 with 50.55 as resistance beyond that. The converging 20 and 50 week SMA's provide support lower and then 43.80 before the 200 week SMA at 42.51. If you had to pick one broad equity index ETF that is heading higher this would be the one. The weekly also shows an increasing MACD and rising RSI. At least one index knows where it wants to go.

So next week looks to bring more new highs for Gold. US Treasury Bonds and the US Dollar Index appear to be heading lower. Oil looks will probably join them going lower as well. The volatility index does not seem like it will impede stocks but only the QQQQ's seem to know that they want higher with the SPY and IWM still scratching their heads about the next move. Good luck next week and trade well!

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