Black and White Technical Report: The Week Beginning 10/05/2021

Sell in May and go away? Not if the US FED has anything to do with it. Following weak job numbers the US SPX closed at an all-time high, closely followed by the DOW30 and Nasdaq again pushing higher.

 

Iron Ore, Copper, Real Estate all at never-before-seen highs is nothing new, this phenomenon occurs each decade, what makes this cycle awkward is the level of debt to GDP in developed countries at very low interest rates.

 

Gold and Silver made impulsive moves higher and retained the gains into the closing session of last week. This is a very good signal for further gains.

 

XJO WEEKLY
Price structure:
The market did not do the retest of 6737 noted last week, however the trading range remains short in comparison to previous weeks and below the key 7130 resistance level.

The consolidation remains to the high side of the impulsive weekly move shown 5 weeks ago, a strong signal of buyers holding positions with an expectation of further gains.

A breakout over 7130 would be a very bullish signal for further gains.

Traders would monitor the market heavy weights ANZ,CBA, NAB, WBA WES, and APT for further gains.

 

Indicator: Relative Strength
The RSI indicator has remained over the key 50 level, last week turned sideways, this is a signal of slowing price momentum.

The RSI should be monitored for a potential move below the key level of 50 to show a shift to bearish momentum.

Comments from last week: Last week’s short range down close bar again signals the market is at a decision point, as buyers have been unable to push higher over the 7130 level. 

Price still remains outside of the Bollinger Band; historical evidence shows the price only remains outside the bands for a short time. This observation and the warning bar #3 two weeks ago would indicate the market may move lower to test the 6737 level, this being a key support resistance level over several years and at this point intime the approximate value of the Bollinger 20 period centre average (green).

Only a close over the 7130 level would give buyers further confidence to move the market higher.

 

XJO DAILY
Price structure:
The 5 period simple moving average seems to be a good short term indicator for price support.

The Daily XJO is developing an ascending pattern, a close over 7090.8 would be significant and may be followed with further gains.

Traders would monitor any breakout for a retest and hold of the 7090.8 level as confirmation of price strength.

Indicator:  Relative Strength
Currently a Bearish divergence signal is not in play as the RSI moves lower without firstly crossing back above the “70” level.

But the reading does show Relative strength moving lower towards the 50 level.

This should now be monitored for a further move lower on any price weakness. 

 

Indicator:  VOLUME
Overall volume has been increasing as price declines, Last Thursdays volume was high on the down close for the day. Further price gains would again need strong volumes to confirm broad market participation.

Comments from last week:  Thursday’s high also posted a FO (fake out) reversal signal  followed by Fridays larger range down close bar also setting a valid pivot point reversal. 

With price sitting on the 5 day simple moving average, the potential move is to the lower side to test the daily support level of 6837.

S&P 500 WEEKLY
Price structure:
The US markets all turned higher last weeks following a weak jobs number, the expectation of Financial Stimulus to remain has underpinned risk in the markets.

The S&P 500 closed at an all-time high, however the Weekly bar also set a #3 type bar with a longer lower shadow, this is often a precursor to market weakness in the coming weeks, but any real market reversal requires price reversal evidence!!.
Rejection can come in the form of a pivot point or engulfing down close bar, only then can we start to talk about a “top” in the market.

 

Indicator:  Relative Strength Indicator
The RSI observation remains the same and is currently reflecting stronger price momentum as the indicator moves higher over the 70 level, moving sideways, this is not a level of over brought, and only indicates very strong momentum, and can last for many weeks.  (This type of momentum is often a precursor to profit taking.)

Should the RSI show a movement below the 50 level, this would signal strong bearish price momentum.

It should be acknowledged the RSI has also remained above the 50 level for the past 12 months.

Comments from last week: The S&P Weekly chart has now displayed a very short-range bar following the bar type #3 of 2 weeks ago.  Buyers have become exhausted following 4 weeks of gains.

The expectation is for a retracement to confirm the 4114.0 level, and potentially a further retest of 3980.0.

This will not change the underlying Primary UP trend, however a period of trading range consolidation may be underway.

 

S&P 500 DAILY
Price structure:
Almost achieved the retest of 4100, but the market has now pushed higher to again set an all-time high price.

Last Friday’s close is outside of the recent trading range and sets up a continuation signal.

The underlying trend remains up.

 

Indicator: Relative Strength
Relative Strength short term has turned lower below the 70 level. The RSI should be monitored for a movement and continuing close below the 70 level as price weakens.

A clear bearish divergence “sell” signal has now failed with the RSI moving back over the 70 level.

Comments from last week:  The Daily chart of the S&P 500 shows a very clear divergence signal in the Relative strength. (see below).

Last Thursday the S&P posted an outside period day (OPu), the daily ranges have remained short indicating consolidation. A retest of  the Daily 4100 could be expected prior to a move higher, but this may take a few weeks to play out.

A closing price below 4100 would set a very bearish signal and trap many buyers above this level leading to a retest and potential break of the underlying Trendline.

USD Spot GOLD – DAILY
Price structure:  A new Primary trend is now underway.
Last Thursday’s and Friday’s impulsive price move now dominate the chart. The next resistance level is shown at $1863.66.

Should profit taking enter the price action a retest of $1797 would be a sharp move and may offer a buying opportunity.

Gold remains in a Primary UP trend.

Indicator:  Relative Strength
Relative Strength turns sharply higher and remains above the key “50” level in line with the current breakout of the trading range developing. This is a good confirmation signal of changing momentum and could be monitored for a further close above the 70 level.

Comments from Last week: The Daily $USD Gold price has spent the past week holding above the very important level of $1764.30 with resistance developing at $1797.0.

A breakout to the high side would be very bullish for further gains.

A change in bullish sentiment would be required to close the price below $1764.30, but this would be a very bearish signal with the potential for a sharp move lower.

$AUD Gold stocks are attempting to show a basing formation from recent declines, the sector should be monitored for further price gains.

The smaller Australian speculative stocks will remain news dependant and price dependant on the AUDXAU price chart. (see below).

 

SILVER DAILY
Price structure:
The daily chart of Silver also shows an impulsive price move away from the $26.00 support level with resistance met at $27.70.

This historic resistance level is now the key level to break, current momentum would suggest a breakout higher into the $28.50 level.

The Primary trend is now confirmed as UP. 

 

Indicator:  Relative Strength
A good indication of price strength is showing in the Relative strength Indicator (14) as the reading is now over the 70 level as this breakout from consolidation shows strong momentum..

A bearish signal will be displayed with RSI moving below the 50 level.

Comments from last week: Silver has remained within a tight range around the $26.00 level, a good signal of impending strength.

The market has attempted to sell down on many days only to find the buyers waiting.

A short term trendline is in place, this should be monitored for a price breakdown below this line. Price weakness would target the $24.60 support level. How-ever the favoured move is to the upside as the Relative strength indicator remains above the 50 level.

 

AUD GOLD DAILY
Price structure:
The final bearish hurdle is now in play, the down trend line set from back in 2020 is the current resistance point.

The “shooting star” from Friday is a bearish reversal signal if the market follows through lower.

This will be dependent on the USD Gold price pushing higher and / or the AUD moving lower.

The Australian Gold producers stock price is very price sensitive around this chart.

The smaller Australian speculative explorer stocks will remain news dependant.

Indicator:  Relative Strength
This momentum indicator has continued a wider swing higher over the key 50 level in line with price gains to reconfirm a valid RSI buy signal. 

Last week’s downturn indicates a slowing of upward momentum, this should now be monitored for a move below the “50” level as a signal of price weakness.

Comments from last week: Australian Gold stocks continue to find early support as the AUDUSD Gold price sits at the $2300 resistance level. The underlying ascending pattern is Bullish with 3 successive lows in place, the expectation is for a breakout higher to continue testing the downtrend lines in place from 2020. 

This is a very good development in the AUDUSD Gold price and offers traders opportunities in the small Gold producer space including the GDX – ETF.

COPPER DAILY
Price structure:  Inventories remain historically low.
Copper remains trading at an all-time high.
The failure of the “shooting star” to follow through lower with last week’s strong range and close on the high only suggest further gains.

Traders should be aware the price chart is described as an exponential price movement and will be subject to sharp price movements should profit taking enter the market is a change of the current very bullish sentiment.

 

Indicator: Relative Strength
Relative Strength has moved above the 70 level and higher than the earlier reading, this constitutes a failure in the potential Bearish divergence signal. 

Confirmation of a loss of momentum will be shown when the RSI moves below the “70” level and below the internal low set during February. The highlighted level in red.

It should be remembered the RSI can track above the 50 -70 level for many weeks at a time and currently remains a signal of very strong price momentum.

Comments from last week:   The “Gap open” is a sell signal, the Weekly bar is displayed as a Shooting Star reversal and the bar has tested the all-time high set in 2011, but closed below this level, hence a Fake Out (FO) move trapping buyers at the high price.

Expect price to move into the GAP area around $4.36 as the potential retest of this breakout move.

The chart remains very bullish for further gains, although traders may take profits in the short term.

AUSTRALIAN VOLATILITY INDEX
The benign reading in the XVI remains a positive for Australian equities, but it should be noted the range expansion during the past week. The higher midweek range shadow shows volatility can easily become elevated as markets enter period of price volatility.

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: Current volatility reading remains positive for further gains within the Australian equities sector. Traders should be aware of the old adage that low volatility leads to high volatility and visa versa as we are currently seeing after many years of elevated readings.

USD DOLLAR INDEX
Price structure:
All recent key support level has failed, the current 90.00 level is now key in the short term. The large range set on Friday only suggests further weakness.

The Primary trend has changed to DOWN with the potential for further declines over a longer period of time.

In contrast the US 10 year bond yield has put in a reversal bar and shows yields may be further increasing in the near future.

 

Indicator: Relative Strength
While the RSI has made a sharp upward turn while below the 50 level, this will be monitored for a cross of the “50” level as confirmation of upward price momentum.

Comments from Last week:  Economic strength is returning to the US economy, this impulsive move set last Friday is an important development. Resistance remains at 91.66, a breakout over this level would be very Bullish for the USD and relatively Bearish for Commodities and FX crosses.

 

WTI CRUDE OIL
Price structure:  This commodity is news driven by supply -demand.
Continuing price rejection at the $66.0 level is not a good signal for further strength. The best outcome is for further consolidation between $61.80 and $66.0.

The current price bars remain short in range compared to what the contract is capable of, but traders should be aware range expansion may give the next strong BUY signal.

A breakout over the $66.00 level would first target $75.20

Underlying Primary Trend remains UP.

Indicator: Relative Strength
RSI turning higher while above the 50 indicates increasing price momentum in the current price consolidation phase. 

Comments from last week West Texas remains above the KEY $61.80 level, however, remains below resistance of $66.0. Further price consolidation at these levels is expected, historically the chart shows this as a major price zone going back many years.