Black and White Technical Report

Last week finished with Major indices testing resistance levels with the Australian XJO developing a Weekly bear flag pattern.

Gold and Silver remain within the historical trading ranges without a major breakout signal developing, more of the same.

Both West Texas and Brent Crude entered the full-on Bull market with higher prices expected.

The current risk being a blow off top above $130bl

 

XJO WEEKLY    
Price structure:  Bearish Flag

3 short-range trading weeks developing against the 2 strong declining weeks of early May 2022. Last week closed at 7238 ( 20 week moving average, not shown ). The Index is developing a Bearish flag pattern. This type of pattern is prone to failure, how-ever should price weakness develop the immediate downside target is 6500 being the February 2021 low. The XJO has remained within  a significant trading range for the past 24 months with an overall declining relative strength.

 

Indicator: Relative Strength 14

Relative Strength has again closed below the key 50 level. Price momentum remains negative. The turn higher is a positive but only a further swing above the 50 level would signify  a positive momentum shift.

Comments from last week: These comments from 2 weeks ago have played out to retest the 7200 level. From the strong close of the Futures markets for the last trading day of the month (MAY) suggesting a further breakout higher off this key level. “The retest of the 6960 (6930 low) is complete with the index closing some 145 points from the low. With the strong buying reaction at this lower level, the potential for the Index to recover the 7200 level remains, this would also put the Index above the long term trendline.” The underlying index has not set a valid “higher low” in this important time frame; the current move remains “corrective”.

 

XJO DAILY  
Price structure:

The Weekly bear flag pattern is observed in the Daily chart with 4 spike high points and currently 4 spike low points, this pattern is considered complete with a directional move expected.

Indicator:  Relative Strength 14

The Relative Strength Indicator (14) reflecting the underlying price momentum has moved higher from below the 50-level indicating a shift to positive momentum. A further move over the 50 level would be a strong positive for further gains in the underlying Index.

 

Indicator:  VOLUME
Trading volumes again have not matched the indicated bullish reversal of last Friday. The high volume down day last Tuesday (4) shows selling into strength. Only strong volumes over 1Bil on a Daily basis would indicate strong buying. 

Comments from last week: Following the pipe reversal of 2 weeks ago to again retest the 7200 level, the rejection has been shallow with the bullish reversal bar showing again last Friday. A further breakout above the 7216 level would indicate a retest of 7370.

S&P 500 WEEKLY
Price structure: 

The S&P 500 meets the make-or-break resistance level of 4200; the short range week is not helpful for the immediate bullish case going forward, given the previous week set a Pivot Point reversal signal. Only a strong close over the 4200 level would send a signal for a Short position cover. The S&P 500 remains within the definition of a Down trend of identified Lower highs (mid-April ) and Lower Low (Current Mid May).

Indicator:  Relative Strength Indicator 14

Price movements are considered positive with a reading above the 50 level, with this continued reading below the key 50 level indicating that price momentum is slowing, an ongoing reading below 50 would confirm the continuing Bearish price movement in the price chart. The potential for an accelerated move lower remains if the momentum slows and moves lower towards the 30 level.

Comments from last week: The S&P 500 has set a significant WEEKLY pivot reversal bar, along with the strong close over the previous 4050 resistance level, a short-term price recovery is underway. This does not change the Primary down trend in place. The 4200 broken support level may offer first resistance with several levels overhead at 4320 and 4545 to contend with.

 

S&P 500 DAILY
Price structure:

The 4114 level is beginning to shape up as a key level to clear (either way) in this short week of indecision. The movement higher from the FO low on 23rd May is “corrective” ; the current consolidation shows indecision following this sharp move higher. A break lower would be in line with the already established trend with the 3940 level as the first target followed by the tentative trendline as the second target. A further close below the 4114 level would give the sellers an advantage as recent buyer stops are taken out.

Indicator: Relative Strength 14

The Relative Strength Indicator (14) has made a lower reading to close the week on the key 50 level. With the indicator reading sitting in the middle of the range (0-100) a movement either way will signal the coming direction. 

Comments from last week:  My comment 2 weeks ago (15th) suggested a short-term price rally underway from the 3 bar reversal. The rally was short lived, this happened in a bear market price structure. On Friday the 20th May an important retest of the lows took place with a Fake out low (bullish) being set, followed by the pivot bar set on Monday the 23rd. The new support level of 3858 is an important level to hold in the coming days.

 

NASDAQ DAILY
Price structure:  Primary DOWN Trend remains

The OPu ( Outside Period Up close) marks the “high” statistically at 94%. The tentative trendline remains at the downside target around 11,500 points. Last Friday’s small range day showed indecision, only a move to close higher over the OPu would give the buyers strength. The Primary trend remains DOWN; this current retracement is part of that trending action.

 

Indicator: Relative Strength 14

Relative Strength moved lower during the week to below the key 50 level, indicating improving price momentum slowing from the 14 day look back period.  The structure also negates the bullish divergence signal, now complete.

Comments from last week:. The trendline has been lowered to reflect the new swing point; this line is “tentative” with 2 touches. This daily chart of the Nasdaq has also set a Mid-week 3 bar reversal following the recent decline to a 12-month low. This is not a trend reversal signal, and the Primary trend remains down. The expectation would be for a short-term rally to test  the resistance level of 13542.

 

USD Spot GOLD – DAILY: Is it a Bull market?  Answer = No

Buyers again desert a potential rally to clear early resistance levels of $1876.90. Last Friday’s engulfing period showed strong selling at a resistance level; further downside could be expected with a close below $1834.0 ( see note below). With the Primary downtrend intact only further consolidation may present an early Bullish signal. With a close below the $1834.0 level, the Primary trend could be expected to continue lower.

 

 

Indicator:  Relative Strength 14

Price momentum has turned lower as a reflection of the current 1 Day movement, the indicator continuing to move below the 50 level to the 30 level will be the critical observation again this week as a signal of decreasing price momentum that may continue to move further lower.

Comments from last week:  The break of the long term trendline is concerning for the short-term buyers. Gold remains within a Primary Down Trend, the last close above the psychological level of $1834 is an important observation, a further close above the OPd high circa $1860 has occurred, this indicates the low is set in this current analysis period. The lower support levels of $1780 and $1764.30 remain in play on further weakness should Gold move to close below the $1798.0 level on an intraday basis.

 

SILVER DAILY    
Price structure:   Bull market? – Early signals are important. None

Last Friday’s FO (Fake Out) , although this higher high sets the immediate tone for further selling in the coming days as resistance of $22.50 is respected. A further close below the $21.60 level sets up a retest of the $20.50 support area. Further consolidation seems to be the theme until a higher closing breakout moves over $22.50 or below the $20.50 level.

 

 

Indicator:  Relative Strength 14

Current Relative Strength is moving higher but remains below the 50-level, RSI turning higher shows price momentum is improving. A continuing move below the 50 level and lower would be very bearish in the short term, and the potential for a further decline remains should price close below the $21.60 level.

Comments from last week: The 3-bar reversal prior to the current secondary consolidation around the $22.00 level. $21.60 is the current intraday support level, the Fake out move last Friday is a good indicator of sellers remaining in the market. This bar can now be referenced for further bullish movements with a close above the $22.44 high.

 

AUD GOLD DAILY    
Price structure:  

Bear flag breakdown into a Bull Flag equals no direction within this multiyear consolidation area between the resistance level of $2712.0 and $2477 support. Local Australian Gold producers will continue to show a lack of direction until significant weakness in the $AUD or a significant rally in the $USD Gold price.

 

Indicator Relative Strength 14

Relative Strength has turned lower below the 50 level and is moving towards the key 30 level, indicating a decrease in momentum. Relative strength may continue to track lower as price has the potential to retest the $2477.0 level on this break below $2600.

Comments from last week:  These comments from 2 weeks ago have now played out,  “Consolidation between the resistance level of $2712.0 and $2600 support may be about to be breached lower as $USD Gold moves lower. Local producers may be subject to current market sentiment (bearish) pricing.” The current breakdown below the important $2600 level sets up the potential retest of $2477 support.

 

COPPER DAILY   
Price structure:  

An impulsive move ( large range Low to high ) in this Weekly Copper chart is a positive for further gains. The Closing price at the $4.50 level is a concern for short term traders, however the current price action is not a reversal signal. Copper should be expected to retest the resistance high of $4.88 – $4.90 in the coming weeks. 

 

Indicator: Relative Strength 14

Current reading has swung from below the 50-level to move higher over this important divider between negative momentum and positive momentum, reflecting the current Primary move underway. The key now is for the RSI to remain above the 50 level as a reflection of ongoing and any positive underlying positive price momentum.

Comments from last week: Dr Copper, an indicator of Global growth and demand for goods, has moved below the very important median level of $4.33. The current movement has the potential to again retest the $4.00 level. Last week’s range has narrowed from the previous week showing sellers in control and buyers unwilling to add to positions.

 

AUSTRALIAN VOLATILITY INDEX:

The decline in volatility has reflected in the gain in equities, 3 month forward PUT option insurance has decreased, suggesting a more risk-on approach. How-ever the reading remains above the key “13” level as a bearish indicator. The cost of 3month forward PUT options is decreasing from recent elevated levels.

The XVI is the difference between 3-month forward pricing of ETO Options against the current month.

As markets anticipate events, the forward priced option volatility changes, hence as forward price changes, this “skew” in pricing is measured in this XVI.

The XVI value works as an inverse observation of the underlying market.   

Comments from last week: The XVI value is expected to rise this week as forward protective risk is again priced in.

 

 

USD DOLLAR INDEX  
Price structure:

Using the Bollinger band overlay, the recent “squeeze” has seen the Bands widen to reflect the increased price movement to the lower side. Last Wednesday / Thursday saw the inner 20 period simple moving average tested and rejected. Price remaining below this average indicates a bearish signal with the potential to retest the lower band circa “100”

 

Indicator:  Relative Strength 14

Relative Strength has turned lower in line with price movements and should now be monitored for further weakness as the current reading below the key 50 level should move lower; a further reading above the 50 level would indicate positive price momentum. The chart should now be monitored for a Bearish divergence signal should the RSI move below the 30 level on lower prices.

Comments from last week:  As the current price decline from the 105 high originates from the Bearish divergence signal developed into the high. This price retracement has disregarded potential support levels during the decline to the current 101.66 level. The Bollinger band overlay has been added to show the price decline is:

1. Below the 20 period average, 
2. The B-Bands are expanding with the current price decline indicating increasing relative volatility.

Several short trendlines have also been disregarded on the move lower, with the longer term T Line now in play around 101.

 

WTI – CRUDE OIL
Price structure:  Full Bull Market. This commodity is highly news driven around supply -demand.

The West Texas Intermediate Contract remains within a strong Primary UP trend. The current close to the $120.0 level has the potential to retest the 7th March 2022 closing high of $124.80. The potential for a high momentum blow off top is now in play.

Indicator: Relative Strength 14

The current price reversal has produced a second higher low in the RSI, the indicator remains above the key 50 level now moving over the 70 level, a signal of strong price momentum.

Comments from last week: The close above the $107.73 level is an important support level for the Oil bulls. This will be the level in play again this week; continued closes over this level will set up a very bullish outlook for closes over the $116.60 level to confirm the current Primary UP trend. The ultimate key level to hold is $94.0; a close below this level would see substantial selling back to the $80 level.