Gold Continues Lower While Crude Oil Extended To The Upside
Dragonfly Capital | Sep 04, 2016 01:30AM ET
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 noted that heading into the unofficial last week of Summer ahead of the Labor Day holiday the Equity markets were tired, consolidating at their highs and even pulling back. Elsewhere looked for gold to continue lower while Crude Oil extended to the upside. The US Dollar Index looked to continue higher short term in its broad range while iShares 20+ Year Treasury Bond (NYSE:TLT) were biased lower in consolidation.
The Shanghai Composite and iShares MSCI Emerging Markets (NYSE:EEM) were both looking like they would continue lower in the short run, more damaging for the Emerging Markets than the Chinese. Volatility (iPath S&P 500 VIX Short-Term Futures Exp 30 Jan 2019 (NYSE:VXX)) looked to remain subdued but back at more normal levels keeping the bias higher for the equity index ETF’s SPDR S&P 500 (NYSE:SPY), iShares Russell 2000 (NYSE:IWM) and PowerShares QQQ Trust Series 1 (NASDAQ:QQQ). Their charts had lost all their strength though and suggested they may continue to pause or pullback in the short run.
The week played out with gold drifting lower before rebounding to end the week near flat while Crude Oil moved lower all week, with a bounce Friday. The US Dollar continued the move higher and then quickly consolidated while Treasuries moved up early, consolidated and then gave it all back Friday. The Shanghai Composite continued in its bull flag drifting lower while Emerging Markets finally found some support and bounced Friday.
Volatility continued in a tight range drifting lower at the end of the week. The Equity Index ETF’s all moved in a tight range for the week drifting lower early and bouncing to recover more strongly following the jobs report Friday. It was a good week to be on vacation. What does this mean for the coming week? Lets look at some charts.
SPY (NYSE:SPY)
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The SPY kept to its recent antics, trading in a very tight range. This week from the low point Thursday to the high point Friday was less than 2.75 points. There was nothing significant about any one of the day’s candles in particular. And that might be the story. Following a Janet Yellen speech last Friday and then the non-farm payroll report this Friday the 3 point range persists. The SPY is not waiting for that information. Maybe it was on vacation phoning it in too.
The daily chart shows the RSI continuing to bounce every time it hits the mid line and then MACD slowly drifting lower, but remaining positive. The Bollinger Bands® have become slightly tighter and are the narrowest they have been since August 28, 1995, over 21 years ago. That is astounding as the SPY is only a point from the all-time high. Tight Bollinger Bands often portend a move to come very soon.
The weekly chart shows another small body candle over support after the run higher. Consolidation. The RSI is in the bullish zone and drifting as the MACD flattens at a moderate level. There is resistance at 219 and 219.50. There are Fibonacci extensions above that at 222.43 and 225.96 followed by 229.48. Support lower comes at 218 and 217 followed by 215.7 and 215 before 212.50. Consolidation in the Uptrend.
SPY Weekly
As Summer vacations end and the back to work mentality begins, the equity markets seem rested and ready. Elsewhere look for gold to continue higher short term while Crude Oil also bounces and moves higher. The US Dollar Index looks to move higher in the broad consolidation while US Treasuries consolidate in their uptrend. The Shanghai Composite looks to continue a digestive drift lower while Emerging Markets reverse back to the upside.
Volatility looks to continue abnormally low keeping the bias higher for the equity index ETF’s SPY, IWM and QQQ. Their charts show the SPY and QQQ continuing in consolidation, with the IWM breaking to the upside, taking the lead. Use this information as you prepare for the coming week and trad’em well.
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