Black and White Technical Report: The Week Beginning 08/11/2021

Last week was a great week for the Index Bulls in all geographies, with Metals, in particular Silver making the move off $23.50 to settle over the key $24.00 level and Gold settling over the key $1800 level may be the catalyst for further momentum gains in the Precious metals.

The key for the week forward is monitoring the potential price signals for a changing of sentiment in these over extended equity markets.

Bull markets tend to grind higher, currently there are no major reversal patterns.

On a cautionary note, many Index charts while trading higher are well away from the 20-period simple moving average and may be subject to a “reversion to the mean” type of price move at the first price reversals.

 

XJO WEEKLY    
Price structure:
The XJO has set an OPu (outside period up close) this type of 1 week price movement can show a high or low after an extended move. The past 5 weeks cannot be described as an extended move, so the potential for further upside remains the current view. A weekly close over the 7530 would give a very strong signal for the price target of 7715 to be met. Currently, the underlying primary trend remains UP, but at risk of changing to Down at a price movement below 7180.

 

Indicator: Relative Strength 14
Relative Strength has turned higher, as the reading is above the 50 level, the next move in the RSI will be telling should it move below the 50 level. For overall market strength or weakness.

The Relative Strength Indicator reflects price momentum.

The RSI should be monitored for a continued move above the key level of 50 to show a continuing shift to further bullish price momentum. 

Comments from last week:  The small range bars mentioned last week have succumbed to price weakness, as the buyers have been unwilling to enter the market as the price approached the 7530 level. The OPd (outside period down close) has closed on the short term tentative trendline. This week a close above the 7530 level would be important for the Bulls, however the OPd is a reversal signal, the first downside target is shown at 7197/7200 area with the risk of a breakdown to test 6900. This will be confirmed should the market close below 7180, with a confirmed down trend in place.

 

XJO DAILY  
Price structure:
Last Tuesday OPd set the low, with the bigger picture showing a HL (higher low) however the developing resistance at 7472 is the key level to break and “close over” on this daily observation. This current move is important for the bullish to negate the potential for a much broader top developing. Last Friday set a FO (fake out) as price breaks higher above a previous rejection level and rejects again, a short 1 to 2 day pull back could be expected. The Daily chart has set the higher low with the Thursday / Friday follow-on working higher on low trading volumes, this remains positive for further gains.

Indicator:  Relative Strength 14
The RSI has moved sharply above  the important 50 level. In the short term a continued move above this key level should be expected with price moving over the 7472 level.

Indicator:  VOLUME
Trading volumes have remained benign on the rising price structure; this is not a great long term signal for the Bullish.

Comments from last week:  One important observation in the Daily chart is the large sell down days do not follow through into lower prices. The Market high was set during August 2021, there has been too much time taken to move above this high. The past weeks I have mentioned the possibility of a major top pattern that is developing from June 2021, playing out into lower prices.

 

S&P 500 WEEKLY
Price structure:
Four weeks of solid gains is starting to ring alarm bells as the market rarely moves in this type of extended move without some form of retest to confirm support. This remains a very strong Primary UP trend with any signals of reversal or topping pattern developing. The range of last week is longer than the previous week showing strong buying. When selling enters the market, the first support level remains at 4545 points to hold.

Indicator:  Relative Strength Indicator 14
A signal of increasing momentum as the Relative Strength Indicator (14) turns higher on the 4th of  large range price movements of last week and the weeks prior. The Relative Strength Indicator is in a good place for further strength, a continued movement over the 70 level would indicate strong price momentum. Historically the indicator can remain over the 70 level for an extended period of time as seen during July – September. 

Comments from last week: The S&P 500 remains very bullish for further gains, in the interim following 4 weeks of gains some consolidation would be expected. The ES Futures contract closed at the high value of 4600 on Saturday morning. This would lead to the expectation of a strong opening today. The bearish wedge (red) breakdown has not followed through lower with a new high being made. The S&P may be forming a price channel with 5000 as the high side target.

 

S&P 500 DAILY
Price structure:
An extended almost vertical price movement has set a “Gap open” , often an exhaustion Gap following a strong price move. A high probability turning point may be in play, confirmation will show on today; should a “gap down” occur, the “evening star” will be set. This type of price pattern has led to many significant reversals, an observation of this was made in early September 2020 and mid-September 2018. However many reversals in the S&P 500 have occurred following an exhaustion Gap higher following an extended price move.

Indicator: Relative Strength 14
Relative Strength Indicator (14) has turned higher over the 70 level, a signal of underlying positive price momentum, a further movement higher over 70 would indicate further strong price momentum and may be viewed as over-brought.  A close below the 70 level would alert traders to failing upward price momentum.

Comments from last week:  Last Wednesday provided the retest of the breakout at 4547. Last Thursday resetting a new pivot point reversal, with Friday confirming the pattern. The lows from September to the 4547 level offer the projected price target of 4850 in the immediate term. The 4547 level is now critical to hold should profit taking see sellers enter with volume.

 

NASDAQ DAILY
Price structure:
With the Bollinger Band overlay, the major “Gap open” movements have been marked. These have occurred with prices moving outside of the upper band, often followed through with a retest of the 20-period average within the bands, or the lower of the Bollinger Band in more severe retracements; April 2021 is an example. The observation for this week is that price has made an extended move above the 20-period average, historically a signal of caution with a potential retest of the breakout at the 15700 level or lower.

Indicator: Relative Strength 14
Relative Strength Indicator moving over the 70 level is a strong sign of improving price momentum, with the 70 level and higher a possibility and an indication of strong price momentum leading to an exhaustion. 

Comments from last week: The Nasdaq daily offers a very similar breakout pattern to the S&P, however the Nasdaq has set an outside period up close; this is often seen as the high point (within 3 bars) following a strong price movement.  The continuing support level remains at 15534 as this was the level of the last retest. With support at 14535 and resistance of 15600, the chart offers a further 1000 point extension of price from these levels to 16600. In the event of a price retracement the price gap at 14765 remains open as a potential retest of this level may also test the long term “tentative” trendline. “Tentative” trend lines only have 2 points of contact.

 

USD Spot GOLD – DAILY     
Price structure: No evidence of a Bull market.
Gold made 2 impulsive movements last Thursday and Friday to close above the key $1800 level. This is a very Bullish signal for a retest of $1834, the next major resistance level. Gold has set a 2nd HL (higher low) , a very strong signal for the long-expected move to retest the $1900 level. Traders should monitor the $1834.0 level for consolidation in the coming days.

 

Indicator:  Relative Strength 14
Relative Strength has recovered and is moving above the 50 level, potentially heading back to the 70 level, a signal of increasing price momentum with the sharp move higher and should again be monitored for a further move higher. 

Comments from last week:  The price level of $1788 remains the main consolidation level as Gold swings between support of $1725.0 and resistance of $1834.0. The current consolidation along the down trendline can be a precursor to bullish price action. The recent price rejection at $1800 has held the short up trendline, leaving Gold at a good point for further upside price action.

 

SILVER DAILY    
Price structure:
Silver has seen a “hammer” retest of the $23.00 level with an immediate follow-through higher out of the Bullish Flag pattern, this sets up a retest of the $24.90 level in the coming days. Two price tests have taken place at this level. A break of the $24.90 level would put Silver back into a Primary UP trend and show the hammer bar as the “higher low” point.

Indicator:  Relative Strength 14
Current Relative Strength is moving over the key 50 level, a very good signal for further momentum gains in price. A move below the 50 level would be very bearish in the short term. 

Comments from last week: The daily chart of silver provides good price structure for further upside following the “shooting star” mentioned last week. The rejection pattern is trading in a secondary consolidation, setting a Bullish flag. With a price breakout above $24.90 resistance Silver will have completed a major base and potentially enter into a Primary UP trend. Some lofty targets are being thrown around by commentators, but the reality is Silver remains within a large trading range between $21.60 and $30.0. A breakout over the $24.90 level would offer the next resistance level of $27.00 as the target.

 

AUD GOLD DAILY    
Price structure:
Finally, a breakout in the AUD Gold chart, a very strong signal for the local miners with many also making strong price moves. (SLR and NST) The underlying ($USD GOLD ) is showing a very strong price move higher, with a weaker $AUD the AUD Gold chart may continue to retest the 2541.0 level. Internally the $2400 level is a strong psychological level to hold in the coming days.

Indicator:  Relative Strength 14
Relative Strength moving strongly back above the 50 level is in line with strong price movements. Price momentum has again turned positive, a further rise in price will see the RSI move to the important 70 level.

Comments from last week: On a strengthening $AUD, the Australian dollar Gold price continues to be suppressed lower as the Primary Metal also further consolidates (around $1800.0). $2328.0 remains as the first support level in this ongoing decline in price.  Price action in the local miners remains positive in the face of a strengthening $AUD, traders would look for price retracements in the producers on this XAUAUD price decline.

COPPER DAILY  
Price structure:
Another retest of the $4.33 level in copper shows a small range bar indicating the market is in balance at this level. Market in balance will lead to a directional price move in the coming weeks

For the bigger picture the move this week in Dr Copper may dictate the overall sentiment toward Global growth in the coming months. A close lower today would indicate a further retest of the $4.0 level underway, however a movement higher would send a strong signal to the bears that this is the higher low point in place.

 

Indicator: Relative Strength 14
Following the sharp turn lower in the RSI is a reflection of the sharp price movement. Current readings are not a good signal for further immediate momentum gains. The key for now is that the RSI remains above the 50 level as a reflection of ongoing and any positive underlying price momentum.

Comments from last week: With the rejection of the $4.80 high continuing, current price action is again testing the key support resistance level of $4.33. The current technical expectation is for the metal to retest the long term trendline meeting at $4.20. This level is also the closing price support area of the past 9 months. Copper so far remains bullish, but price consolidation can take many months to resolve. This type of price action offers many trading opportunities both long and short.

 

AUSTRALIAN VOLATILITY INDEX
Currently reflecting the underlying bullishness in the Australian equities market, the current reading would infer further gains as the forward price of  buying risk cover is no longer in demand.

The XVI is the difference of 1–3-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: Price volatility is rising in the forward ETO options market, inferring the cost of protection is rising on demand. While not extreme at this 12.80 level, a move over the 13 level will remain a bearish signal for Australian top 200 equities.

 

USD DOLLAR INDEX  
Price structure:
The USD Index again set a FO (fake out) as price moved past the previous high point set early October to close inside this level. This is a picture of consolidation and will also show in the associated FX cross. The $AUD currently displays a “hammer bar” in the daily chart, suggesting the low has been set in line with this DXY showing rejection of high prices towards 94.70.

 

Indicator:  Relative Strength 14
Relative Strength has turned higher in line with price movements and momentum.  And has the potential to move higher on further price strength while above the 50 level.

Comments from last week:  The impulsive price movement from the UP trendline is in line with the longer term underlying UP trend = very bullish for further gains. This is a very strong signal for further gains; a closing price over the 94.70 would complete the major base pattern spanning the past 12 months. The key level to hold in the coming days is the 93.45 support. An up trendline is now in place.

 

WTI CRUDE OIL
Price structure: This commodity is news driven by supply -demand.
This is a strong chart with a flag pattern developing at the current trendline, price is trapped between resistance at $84.25 and current support of $75.20. The Primary trend remains UP as the WTI moves higher away from  the multi-year consolidation zone. This remains a VERY bullish picture for further gains. Oil $100

 

Indicator: Relative Strength 14
RSI has set a sharp reversal to move over the 50 level and now the 70 level. Close inspection shows the indicator “rolling” sideways putting the longs on alert of slowing momentum, this is a typical type of movement inside a retracement flag pattern.

Comments from last week: The WTI contract has had a great run from the breakout of $75.20. Last week’s OP (outside period) may be the short-term top marker for a retest of $75.20. The confluence of the Trendline and the potential support level of $75.20 continues to offer a very bullish long-term picture for the WTI contract.