Black and White Technical Report: The Week Beginning 08/03/2021

Over the weekend the US Senate passed the $1.9T stimulus bill, the next part of stimulus may come from an infrastructure bill. This all adds to the potential liquidity of the US economy with a flow on effect into equities.

 

Charts to watch this week include the US dollar index (DXY) making a significant Technical breakout last week as the flight from equities to the US dollar gathers pace. 

 

Gold and Silver continue to lose momentum with declining prices persisting as important support levels are broken as prices move lower.

The Gold bugs and promoters have been consistently wrong about an impending rally in precious metals as the underlying Primary price trend persists lower.

 

WTI is now testing 2018 highs on good upside momentum. The weeks chart shows an expanded range adding to the bullishness of the current move.

 

XJO WEEKLY
Price structure:
The break of a potential short term trend line has developed as price consolidates around the 6737 level. The chart remains within a Primary UP trend, with a bullish pattern developing over the past 4 weeks of consolidation. A breakout over the OPd high 6938 is required to confirm a Primary trend remains in place.

 

Indicator: Relative Strength
The RSI indicator has remained over the key 50 level, last week a little higher, a sign of improving price momentum. A bearish divergence has developed within this momentum indicator and is now confirmed with a move below the previous low reading, this may have further to play out. The RSI should be monitored for a move below the key level of 50 to show a completed shift to bearish momentum.

 

Indicator: MACD
MACD remains a swing buy signal, but is closing in on a SELL crossover, again this highlights how slow this indicator can be in a fast market. It should be acknowledged this indicator can be very slow to react on a weekly basis and may continue to track sideways in the coming weeks as it did during 2019. Traders should notice the faster average (orange) is now turning down and may swing to a sell signal.

Comments from last week: The XJO weekly now shows the Lower high just short of the 7130 Q1 2020 high. Although potentially in the very early stages of a more intense market decline, there is a significant amount of price discovery to come before these claims can be made. Currently the short term trend line is being tested on increasing volumes and declining positive momentum. The break-off short term support at 6737 with price closing in the low portion of the bar is the first signal of impending weakness.

XJO DAILY
Price structure:
The daily chart shows a new support level developing at 6655, this will be the level to hold in the coming week as further consolidation takes place. With several levels of Support and Resistance showing a breakout will have some significance if completed on high volume. The mix of down days on high volume signifies distribution. 

 

Indicator: Relative Strength
With RSI making a series of lower highs recently and remains tracking below the 50 level, setting a bearish momentum signal, a cautionary view of higher market momentum should continue to be held.

 

Indicator: VOLUME
High Volumes in this small pattern indicate an increase of selling on down days, this indicator should now be monitored for declining volumes to signal a loss of selling momentum.

Comments from last week: Daily support at 6765 has been decisively broken with a large range bar. The next and key support level shown at 6510 will determine the underlying health of the market. The XJO remains within a large consolidation phase beginning form November 2020. This will provide mixed results in equities with sector performance the key focus.

 

S&P 500 WEEKLY
Price structure:
Weekly support at 3725 will be the key level to hold in the coming week, it should be noted last week’s closing value was higher than the previous week (2 weeks ago). The market has not displayed any bearish momentum and simply remains in consolidation. The weekly high of 3950 will be the key level to take out on a price rally from this level.

 

Indicator: Relative Strength Indicator
Relative Strength remains above the key 50 level and has set a Bearish divergence from price. This not the same but remains very similar to the Jan Feb 2020 divergence setup and continues to play out. RSI is currently reflecting slower momentum as consolidation takes place, a movement below the 50 level would signal very strong bearish price momentum. It should be acknowledged the RSI has remained above the 50 level for the past 11 months.

Comments from last week: Pivot point reversal towards first support at 3725 with e lower support at 3600 pivotal in holding positive market sentiment. The Outside period (OPd) of 2 weeks ago playing out into lower prices on an expanded range bar. This is a bearish development within the current price structure.

 

S&P 500 DAILY
Price structure:
The potential is for a completed a, b, c retracement, the signal is Fridays large range bar with a high close, can be very bullish for further gains in the coming days. With one small resistance level to overcome at 3872.0, a daily close over this level would signal a retest of the highs underway. A new tentative trend line (2 points) is now in place. A price breakdown below last Thursdays low at 3723 would be a very bearish signal. The next significant downside price GAP to fill is shown at 3390.

 

Indicator: Relative Strength
Relative Strength short term has turned BEARISH. The RSI should be monitored for a movement and continuing close below the 50 level and further move below key 30 level as a loss of upward momentum gather pace.

Comments from last week:  Wednesday, Thursday last week have set a lower high, with Fridays retest of the 3872 before closing towards the low, suggest buyers remain in the market. However, the short term trend line has been broken leaving behind a potential support area. A further breakdown below 3800 would signal a continuation move towards 3600.

 

USD Spot GOLD – WEEKLY
Price structure:
Goldbug can’t catch a bullish move at the moment. The Primary Trend (Weekly) remains firmly DOWN, with a retest of the long term trend line being completed. A further breakdown from this trend-line would send a very bearish signal to the long term holders and may see a capitulation move lower through the current trend-line to search for the next trend-line at circa $1550. For this price chart to turn Bullish a close over $1764 is required.

 

Indicator: Relative Strength
Relative Strength turns lower again and fails to cross the key “50” level. This is a key indicator of “slowing” price momentum, a continued move lower would only reflect negative price momentum both in the Daily and Weekly charts. Look for an up turn in the RSI to confirm any potential price rally getting underway.
 

Comments from last week: Gold continues into the current Primary Down trend. (institutional traders do not hold downtrends) The retest of support from 2 weeks ago resulted in a short rally to retest the midpoint support level of $1826.00 with immediate rejection. Current momentum suggests a retest of the Primary trend-line circa $1700.

AUD GOLD DAILY
Price structure:
During the last 2 weeks we have seen a weakening of the Australian dollar from the 80c high to around .7686, a significant decline. However, the underlying USD Gold price has also declined leaving the XAUAUD to languish at 12-month lows. Last Friday’s OPu (outside up close) may signal a short-term base in this current decline. This will play out into Australian Gold producers NCM, NST, RRL, SLR and others. The Australian gold explorers will remain dependant on news flow.

 

Indicator: Relative Strength
With the RSI turning higher from below the key 30 level showing a changing momentum. The bullish divergence signal did not develop, but this momentum indicator can now be monitored for a move above the 30 level. This may lead to a short price rally. This momentum indicator needs a continued swing higher over the key 50 level in line with any price gains to confirm a valid buy signal.

Comments from last week: AUDUSD continues to consolidate below the important $2288.0 level. This price chart remains in a Primary down trend and will continue to place price pressure on local Gold producers. There is nothing bullish in this current price structure, except the price divergence developing within the Relative strength Indicator. A short price rally will be against the underlying down trend.

 

SILVER DAILY
Price structure:
Last week Silver traded below the tentative trendline and below the key $26.00 support level. This key level will remain as the resistance level to beat on any upswing in price. Friday’s “hammer” bar may bring higher prices in the short term. The Silver chart remains in a far stronger position than its counterpart Gold to take advantage of a change in sentiment in precious metals.

 

Indicator: Relative Strength
Relative Strength has turned lower below the 50 level, operating in line with the underlying price movement. A good signal for further improvement in price momentum would be a move above the 50 level.

Comments from last week: The Daily silver chart continues to hold above the key support level of $26.00 and above the confirmed trend line. Friday’s lower retest of this level with a close back towards the midpoint suggest buyers remain. The price construction within this chart is vastly different from the Gold chart. Silver remains the stronger of the two. The big level to hold for buyer support is $26.00 a move below this level would be a very bearish move and offer traders momentum.

COPPER DAILY
Price structure:  Inventories under pressure.
From the shooting star of 2 weeks ago, the current close remaining above the $4.00 level is a very good signal for further gains. The current consolidation remains strong as the metal found buyers below the $4.00 level during the past week. This current level will be the benchmark of support in the coming days, a close below $4.0 would be a short-term bear signal and should be monitored for plays in the Australian copper stocks, S32 OZL, COD, KFM and others.

 

Indicator: Relative Strength Indicator
Relative Strength has moved over the 70 level. An early BEARISH divergence signal has now confirmed. Further confirmation will show as a move below the “70” level. It should be remembered the RSI can track above the 70 level for many weeks at a time, and remains a signal of very strong price momentum.

Comments from last week: Inventory pressure has moved Copper significantly higher over the 12 months. Last Friday price resolved into a “shooting star” suggesting the market has moved to profit taking. A further retracement could be expected to initially retest the $4.00 level. Consolidation above this level would be viewed as extremely positive. Further support is shown at $3.80.

AUSTRALIAN VOLATILITY INDEX
The XVI has moved higher from an early week low in line with market volatility, however the close is shown lower than the previous week. With the market Indexes consolidating a move lower would be expected. The current reading of 16.6 is not extreme but remains elevated.

The XVI is the difference of 1-month forward pricing of ETO Options against 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 to the underlying market.

Comments from last week: The large range bar last week has given way to a lower close over the previous week. Volatility remains in equity pricing as the cost of option PUT insurance remains elevated.

USD DOLLAR INDEX
Price structure:
The flight to the USD is underway as the price breaks out above the down trend line and first level of major resistance shown at 91.66. With Bond yields increasing and approaching the Dividend yield of the S&P500, this current bullish move would be expected to continue.

 

Indicator:  Relative Strength
While the RSI has made a sharp recovery the 50 level. Traders will look for an RSI to remain above the 50 level to confirm a more significant momentum move higher is underway, this remains highly probable. The December / January divergence signal is playing out.

Comments from last week:  The most important chart in the world the USD Index has set an impulsive move higher, possibly forcing a “short cover” following the surge higher in US Bond yields. The down trend line is currently being tested, a continued move higher in the coming week could be expected.

 

WTI CRUDE OIL
Price structure:  This commodity is news driven by supply -demand.
Last week saw a very strong move in WTI to test the $66.00 level without hesitation. The Primary Trend in Oil remains UP. The next key level for WTI is the July 2018 resistance level shown at $75.20. With he short trendline in place a breach of the line may signal the first move into consolidation of price. With as closing price below support at $61.80 a signal for a retracement would be in place.

 

Indicator: Relative Strength
RSI turning higher over the 50 level and now over 70 remains in a very good place for further momentum price gains until a dip below the 70 level. The indicator is “rolling” higher in line with current price. As the indicator remains over 70, this should also be monitored for a potential divergence signal.

Comments from last week : Two weeks ago an expectation of weaker prices as price remained below the $61.80 level. Last week saw a decisive move above this level although the RSI remains extended. The $66.00 resistance level remains the current higher price target. Currently the price remains with the 2019 historical price consolidation area, and may further consolidate at these levels.