Black and White Technical Report: The Week Beginning 03/01/2022

Remember back in August 2021? The US Fed said the Bond taper program would start earliest in 2023… Last week the FED stated taper operations will start in 2022. A year earlier.

 

In the US, the Nasdaq is leading the Major indices lower, price momentum has also turned negative in the S&P along with the USD Index. When all averages are in confirmation, this will signal a Bear Market move for 2022.

 

Gold and Silver look to have “again” tested support lows, movements at current support point to short-term gains with potentially an important retest of highs, this could confirm the Bullish case for Gold in 2022 as this base pattern grows.

 

Currently the Daily ATR (Average True Range) in Gold is circa $19.0, opening many trading opportunities.

 

XJO WEEKLY    
Price structure:

Last week the XJO200 Index set an Outside Period (OPu) indicating confusion between the Buyers and the Sellers. Although the trading volumes remain relatively low the large range of the week has set volatility levels higher (See XVI below)  

The high of the week was the retest of the Mid August 2021 high, what is important was the close below 7530 inside the real consolidation area.

The underlying Trendline is now confirmed (3 touches) a break of this trendline will be the first signal of weakness. Statistics show the outside period up close has a remarkably high (94%) incidence of indicating the high point within 3 bars.

A closing price breakout above the 7530 level and all-time high of 7632 would be an important development for the Bulls.

 

Indicator: Relative Strength 14:

Relative Strength has turned sideways, as the reading is above the 50 level, the next move in the RSI will be telling should it increase in value, this is a good position for further gains.  The Relative Strength Indicator reflects price momentum.

Comments from last week: With the retest towards 7530, technically the index remains within a now 30+ week consolidation zone. While individual equities will have their own chart patterns, this type of consolidation only suggests money flow is not increasing at the heavily weighted top end of the Index. Past observations show the breakout when it comes can be decisive and given the Primary trend is UP, a breakout to the upside would be expected. The “tentative” ( 2 touch) trendline should be watched closely for further support.

 

XJO DAILY  
Price structure:

The Strong Daily movement lower last Thursday found support in the 7370 area, following the Fake out high (FO) ; this has set a second reversal pivot point.

Last Friday, the up-close bar would only indicate a retest of the high was underway.

The resistance level of 7530 will be the key level this week, a close over this level would set a very Bullish tone in the market.

Indicator:  Relative Strength 14
The Relative Strength Indicator (14) reflecting the underlying price momentum has moved higher on Friday’s movement and remains above the key 50 level. Indicating  the upside momentum is positive. On a Daily basis, continued movement over the 50 level would show positive momentum.

 

Indicator: VOLUME
Trading volumes have been light in the past week during this consolidating price structure, with last Thursday putting in the highest volume day of the year. 

Comments from last week:  Last Friday’s reversal bar has been completed on very low volume and may be a small risk off event prior to this long weekend following a great run up to the 7530 level. The 7370 level will be critical to hold in the coming days, however a breakout over 7530 would be a very bullish signal within this large consolidation.

 

S&P 500 WEEKLY
Price structure: 

The new all-time high was again met with immediate selling to set a second outside period down close below the 4720 level.

The S&P 500 remains in consolidation below 4720 and 4545.

A break of the 4545 level would be a very bearish signal given the Nasdaq has already broken several important support levels.

 

Indicator: Relative Strength Indicator 14

It still remains a concern the RSI has not made a new high. The relative strength indicator has again moved to a Bearish divergence signal. The divergence “sell” signal will occur with a movement below the 60 level (redline).

The current sideways movement is reflective of a positive outcome for the week of consolidation.

A reading below the key 50 level would signal loss of momentum and potentially further price weakness.

Comments from last week: The S&P 500 has set a new all time high during the past week following the previous week’s OPu, however this is not a decisive price move as the range, low to high is very short. The expectation is for further consolidation along the 4720 level, on price weakness a retest of the 4545 level is possible, this would be the area to monitor for a buy signal.

On a broader observation this long rising wedge pattern can set off a sell down on a break of the underlying pattern line, a retest of the 4545 level should be monitored for both a bullish hold AND a bear signal should the range high to low be a long-range bar. February Q1 2020 shows an excellent example.

 

S&P 500 DAILY
Price structure:

Last Tuesday the S&P 500 set a new all-time high and an early session Bull trap with immediate follow-through lower on Wednesday. The current Thursday – Friday short-range days indicate the Sellers do not have control. The first level of support is the Tentative Trendline around the 4650 level.mA retest of the 4545 level remains highly probable as momentum has now turned negative (see RSI note)

 

Indicator: Relative Strength 14
Relative Strength Indicator (14) has turned lower and is below the key 50 level. A further lower close below the 50 level would alert traders to further decreasing price momentum.

Comments from last week:  The four short range days last week do not indicate selling, keeping in mind this is a very light volume time of the year. The first bullish signal may come from a successful retest of the 4720 level. (See last week notes below)

The OPd (Outside Period – down close) is often a marker for a turning point; a retest of 4720 could be expected.

NASDAQ DAILY
Price structure:  

The failure of the Index price to close over the 3 Bar reversal pattern set 2 weeks ago has set the catalyst for the current large range price declines as buyer stops are taken along with added short selling. The Nasdaq is testing the critical lower level at 15530 and setting a close below the “tentative trendline”. The non-confirmation of the Tentative Trendline is of concern as the Index searches for a lower level of support. Currently the Nasdaq remains within a large consolidation area below 16776 with current support at 15530. A break below the support level would set a bearish signal with the potential to retest lower support levels.

 

Indicator: Relative Strength 14

Relative Strength Indicator moving below the 50 level is a sign of negative price momentum, however the current reading swinging around the shows waning momentum and should be monitored for a move lower as a precursor to price breaking to lower support levels. 

Comments from last week: During the past week the Nasdaq has set a 3-bar reversal pattern and followed lower, as with the broader markets this has been completed on very low volumes.

This index remains within a large consolidation zone with 15700 as support and 16776 as resistance. The descending pattern breakout has the potential to “retest” the breakout point and the long-term “tentative trendline.

 

USD Spot GOLD – DAILY
The rejection of higher prices at the $1834.0 level further confirms Gold remains within a large consolidation range with $1788 support again tested last week. USD Gold is not in a Bull market and shows NO signals for a major run higher as resistance levels are respected. The past 6 weeks show the 1-day Average True Range (ATR) up to $19, which is highly tradable in short term trading time frames. A retest of $1876.0 would confirm a bullish stance for Gold into 2022.

Indicator:  Relative Strength 14
Relative Strength shows a reading above the 50 level  and turning higher, as upside momentum continues to improve.

Comments from last week:  No underlying Primary trend is evident in this long consolidation phase, however the “higher low” observation at the 3rd retest of the trendline prior to 2 retests of the $1788.0 level is important. The Midweek retest of the $1788 level is the most important development for building a current Bullish case in Gold. With price momentum turning higher (RSI), a breakthrough of the $1834.0 level could be expected with a further retest of the important $1876.0 level.

 

 

SILVER DAILY    
Price structure: No Bull market.
“Silver has entered into an early stage of a Bull run” Wrong! Failure of the USD Silver price to breakout above the $23.50 has set a new Lower high (LH) as the lower support level at $21.60 is again tested. Silver has reminded us again that the underlying Primary Trend remains down.

Indicator:  Relative Strength 14
Current Relative Strength is moving above the 50 level and now turning higher shows bullish price momentum improving.  A continuing move above the 50 level would be very bullish in the short term. 

Comments from last week: Silver has also provided an important “retest” of a past support level at $22.50. With a further cross of the $23.50 Last Tuesday high, a retest of the Down Trendline would be an important development. Silver has entered into an early stage of a Bull run, with several resistance levels ahead; a breakout from these levels would force a short cover and potential run to  the $27.70 highs.

 

 

AUD GOLD DAILY    
Price structure:
$AUD-XAU remains within the descending consolidation pattern. The “3 low” pattern remains in place. From this type of price action, the expectation is for a breakout higher. A lower $AUD would facilitate this type of move. 

Indicator Relative Strength 14
Relative Strength moving sideways has turned higher and remains above the key 50 level this shows positive momentum, this ranging movement is typical with consolidation areas.

Comments from last week:  The current descending triangle is now deemed complete with the 3 low points now in place along the support level of $2477.0 and approximately 2/3 along to the apex point of the triangle. This structure could underpin the current support in many Australian Gold producers. With the underlying $USD Gold looking bullish, only a strengthening $AUD would force the price lower.

COPPER DAILY   
Price structure:
The $4.33 tested again last week, over all this consolidation area looks well supported the lower shadows of the Weekly candles indicate as price probes lower to the $4.00 level immediate buying takes place.

Indicator: Relative Strength 14
Current readings swing above and below the 50 level reflect the current consolidation underway. The key for now is the RSI remains above the 50 level as a reflection of ongoing and any positive underlying positive price momentum.

Comments from last week: With the Weekly price now closing above the very important level of $4.33 following the pivot set 2 weeks ago, the underlying price has set the stage for a further retest of the $4.80 area. Copper remains within a consolidation zone with $4.00 support and $4.80 resistance.

 

AUSTRALIAN VOLATILITY INDEX
The mid-week announcement by the US Federal Reserve saw a risk-off event taking the XVI higher as the forward price of PUT insurance increased. The close has remained inside the “bullish for equities” zone; a further breakdown in the value of the XJO would push the XVI higher.

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: Forward Volatility has moved lower and remains in the Bullish / complacency for equities window. Seasonally this period of the year has seen consistent market gains. The forward pricing for risk has declined, indicating this year may also see the Xmas – New Year rally.

 

USD DOLLAR INDEX  
Price structure:
Last Friday’s strong move lower has again tested the 95.70 level. This secondary consolidation area continues until a breakout above 96.93 or below 95.70. The outcome of a breakdown will show an increased $AUD, potentially bringing down the AUD-XAU price, a bad result for local Gold producers.   

 

Indicator:  Relative Strength 14
The Relative Strength has turned lower in line with price movements and consolidating momentum. The potential to move higher on further price strength is only while remaining above the 50 level. The current direction could see a break below this key level in line with a breakdown in price.

Comments from last week:  A break down from support and sharp recovery set the Fake out low. The USD Index remains within the consolidation area with the potential to retest the 96.98 level. Currently the support level has 2 touches; a 3rd retest with reversal price action would set the stage for a breakout higher. In the coming week, a close below the 95.70 level would have the sellers in control and will have set a top with the potential to retest the trendline and below.

 

WTI – CRUDE OIL
Price structure: This commodity is highly news driven by supply -demand.
The current price rally above the $75.20 level following the successful retest of the two lower support levels sets up the WTI contract to test the $84.25. Following these recent 3 weeks of gains, an intra week retest of $75.20 would be viewed as a positive.

The underlying Primary Trend remains UP.

The new trendline is now in place.

Indicator: Relative Strength 14
Relative Strength Indicator turning higher as of 3 weeks ago the market remained in balance. The sharp turn higher is a very good signal of sharply higher price momentum; the cross above the 50 level now continues to confirm the bullish view.

Comments from last week: The initial 3 bar reversal has followed thru with higher prices. With last week testing and respecting the $75.20 resistance level further consolidation below this level can occur. A breakout higher with a closing price over the $75.20 would be a very bullish signal for further gains and retest of $84.25.