A weekly excerpt from the Macro Review analysis sent to subscribers on 10 markets and two timeframes.
Last week’s review of the macro market indicators suggested heading into the unofficial last week of summer, the equity markets had dodged a bullet, but still needed to prove they had the strength to continue and not get pulled lower.
Elsewhere looked for gold (NYSE:GLD) to continue to bounce in its downtrend, while crude oil (NYSE:USO) continued higher. The US dollar index (NYSE:UUP) was biased to the upside in consolidation, while US Treasuries (NYSE:TLT) were biased lower. The Shanghai Composite (NYSE:ASHR) and Emerging Markets (NYSE:EEM) both looked to continue their bounce in the downtrends, and might turn into reversals.
Volatility (NYSE:VXX) looked to remain elevated, keeping the bias lower for the equity index ETFs NYSE:SPY, NYSE:IWM and NASDAQ:QQQ, despite their rebounds higher last week. Their charts all showed signs of both promise to the upside, but further risk of another turn lower. Best to keep all long trades on a tight leash.
The week played out with gold holding in a tight range with a downward drift toward the end of the week, while crude oil jumped to start the week and then held. The US dollar started lower but mid week turned higher, while Treasuries pulled back to support and then bounced. The Shanghai Composite had a short week but spent it drifting lower, while the bounce in Emerging Markets ended as well.
Volatility refused to move lower, or higher, holding in the higher range. The Equity Index ETFs started the week at last week's high before moving to a higher low and bouncing back to a lower high. A tightening range, with the SPY, the IWM and the QQQ all moving that way. What does this mean for the coming week? Lets look at some charts.
SPY Daily
The SPY stated the week with a narrow range day inside Thursday’s long move higher, but below Friday’s candle with an upper shadow. Confirming a reversal lower. That had follow through Tuesday with a gap lower. The bounce Wednesday made Tuesday a higher low and continued to move up Thursday, printing a Shooting Star candle though.
That was confirmed lower Friday. There is now a tightening range in a triangle consolidation with a series of higher lows and lower highs. The RSI on the daily chart has failed to make it back over 40, though, on any bounce, and although the MACD has stopped falling, it is showing no interest in moving higher either.
On the weekly chart, what was trend support acted as resistance, knocking the price back lower. The Hammer from last week was not confirmed, but an inside week gives some hope to bulls for a consolidation period and then a possible reversal. Bears will be measuring the move lower to 174 on a fall out of consolidation. The RSI on the longer timeframe is firmly into bearish territory and approaching oversold levels, while the MACD is falling hard.
There is support at 191.70 and 188 followed by 183. Resistance higher may come at 194.60 and 196.40 followed by 198 and 199.50. Consolidation in the Pullback, Watching for Direction of Break.
SPY Weekly
Heading into the Holiday shortened week, the equity markets have seen consolidation following the damage of the prior week, and traders lining up on both sides looking for a break. Elsewhere, look for gold to continue lower, while crude oil has a short term bias to the upside. The US dollar index continues in consolidation with an upward bias, while US Treasuries are also biased higher in the short term. The Shanghai Composite and Emerging Markets are biased to the downside.
Volatility looks to remain elevated, keeping the bias lower for the equity index ETFs SPY, IWM and QQQ into next week. Their charts all show short term consolidation in a tightening range, as all correlations go toward 1.0 in a crisis or panic. The longer charts show the damage to be limited so far though. The QQQ looks the strongest, with the IWM at support, and the SPY most vulnerable. Use this information as you prepare for the coming week and trad’em well.
Disclaimer: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog. Please see my Disclaimer page for my full disclaimer.