Last week’s review of the macro market indicators suggested, heading into the new week that the equity markets looked vulnerable.
Elsewhere looked for Gold to continue lower while Crude Oil churned in a consolidation zone. The US Dollar Index looked to continue higher while iShares Barclays (LONDON:BARC) 20+ Year Treasury (ARCA:TLT)continued lower. The Shanghai Composite looked to continue its broad consolidation with a short term downside bias and iShares MSCI Emerging Markets (ARCA:EEM) were biased to the downside. CBOE Volatility Index looked to remain low keeping the bias higher for the equity index ETF’s SPDR S&P 500 (ARCA:SPY), iShares Russell 2000 Index (ARCA:IWM) and PowerShares QQQ (NASDAQ:QQQ). Their charts looked better to the downside though with the SPY the weakest and the IWM and QQQ a bit stronger on the longer timeframe.
The week played out with Gold continuing lower but at a slower pace while Crude Oil finally broke he consolidation to the downside. The US Dollar showed continued strength as it moved higher while Treasuries found found support and bounced. The Shanghai Composite continued the drift up in consolidation ending near resistance while Emerging Markets moved lower.
Volatility continued the rebound but stayed short of a breakout. The Equity Index ETF’s continued their moves lower but then diverged mid week with the QQQ continuing lower while the IWM bounced, while the SPY found support and settled. What does this mean for the coming week? Lets look at some charts.
The SPY started the week with a small body candle holding inside last Friday’s and over support, giving hope for a reversal. But the gap down Tuesday ended that and follow through Wednesday tagged the 100 day SMA. The rest of the week held in that area, closing the gap Friday with an inside real body. The daily chart shows a RSI turning back lower but holding onto the edge of bullish zone while the MACD continues lower. Unclear from this view if this is a looming bear flag or consolidation for a reversal higher. If it continues higher a Positive RSI Reversal would target a move up to 218.78.
The weekly chart below shows a move back into the consolidation box with the Bollinger Bands® tightening. The RSI on this timeframe remains bullish and over the mid line, but pulling back, while the MACD has crossed down. These support more downside. There is support lower at 204 and 203 followed by 202 and 200 before 198.60. Resistance higher stands at 206.40 and 209 followed by 210.25 and 212.25. Short Term Consolidation with Downward Bias in the Long Term Uptrend.
Heading into the March Options Expiration week the equity markets are a bit mixed, mostly better looking to the downside. Elsewhere look for Gold to continue lower along with Crude Oil next week. The US Dollar Index may consolidate in the uptrend but has a clear bias higher while US Treasuries are biased lower. The Shanghai Composite is trying to break consolidation to resume the uptrend while Emerging Markets are biased to the downside still.
Volatility looks to remain subdued but above the low range of the early 2014 keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ, but with the wind easing at their backs. Their charts all are consolidating in the short run with the bias to the upside for the IWM while to the downside for the SPY and QQQ. The long term uptrend remains in tact for each though. Use this information as you prepare for the coming week and trad’em well.
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