Black and White Technical Report: The Week Beginning 10/08/2020

Earnings and company updates have pushed the US indices during the past week, with Australia barely able to follow.

Gold and silver put in another stellar week and have become exponential vertical in the daily chart. This is where short sharp intraday moves happen as the short term traders take profits.

Week 10 sideways in the dullest of futures markets at the moment, Oil, probing above the key $42.0 for buyers, none were found.

 

XJO WEEKLY
Price structure:
The XJO continues to trade within the boundary’s of the secondary consolidation, although it can be observed a “bullish flag” may be developing with last weeks lower high and lower low but a high close. The week was mixed with financials and materials taking alternate daily leads. Looking at individual materials stocks BHP, RIO, FMG and selective Gold stocks are the standout.

 

Indicator: Relative Strength
Relative Strength, again week 10 and still nothing to see here, sits just at the “50” level, and pointing sideways, suggesting a balance in price momentum remains.
Further consolidation in the price chart may this this dip below the key 50 level.

 

Indicator: MACD
MACD remains a swing “buy” signal, and shows how useless this indicator is in large time frames.

Comments from last week: Another week of consolidation within the defined upper and lower boundaries. Within this “Index” the financials ex BNPL stocks have forced a decline in the Index. The lower 5720 level will be the decisive level in the coming week. A reverse pivot is now complete with  a close below the low of 2 weeks ago. And a further Weekly low could be expected. The Adage of “never short a dull market” remains, in this case the previous Q2 of 2020 remains within the defines of a Primary UP trend, and this may prevail as there is NO evidence of a primary down trend.

 

XJO DAILY
Price structure:
Last Tuesday completed the Bullish Pivot reversal, with clear resistance at 6050, any breakout over this level will be an important development early this week.

Long consolidation periods often end with violent breakouts hence the saying “never short a dull market”.  With a favoured breakout higher, resistance levels at 6200 will be the first target.

 

Indicator:  Relative Strength
RSI has turned lower as would be expected with this type of price consolidation. The potential move below the “50” level is concerning and has often been the early sell signal for the larger Weekly time frame (above).

Indicator:  VOLUME
Volumes continue to decline on a daily basis, any breakout higher must be accompanied by an increase in volume to confirm the underlying move higher.

Comments from last week:  The current breakdown from the longer-term underlying trend line is concerning. Last Friday’s move lower from a string of small range days accompanied by high volume states the Sellers are in control. The key support level in the coming week is 5720, a close below this level would be a very bearish signal. Only a daily closing value over 6160 would create a bullish picture.

 

S&P 500 WEEKLY
Price structure:
The February “GAP” has been crossed with 30 points left to an all time high. Last week’s high close would favour this outcome. Last week also posted a longer range candle suggesting momentum to the upside remains strong.
Traders should be aware this is NOT a broad based rally, rather a top 10-15 stocks rally, this type of movement can end very quickly.
But for now the Index remains very bullish for further gains.
Primary trend remains up.
 

Indicator:  Relative Strength Indicator
Relative Strength turning higher from above the key 50 level last week is a further sign of a increase in upward momentum, the RSI needs to remain above the key 50 level and continue to rise for current momentum to remain positive.
A move below this 50 level is a signal of bearish momentum.

Comments from last week: The Weekly chart shows a strong close pushing into the GAP area left open during Q1 2020. This is a very strong signal for further gains, trading should monitor this Gap level for price rejection, a very bullish signal would occur with a close over the GAP level.

 

S&P 500 DAILY
Price structure:
The pivot identified last week has followed through as the February GAP is closed. It appears nothing can stop this index from pushing higher. As traders of price action, the reasoning for Index advance must remain in the background.
This week may see a breakout on strong momentum into fresh highs.

 

Indicator: Relative Strength
RSI signal line has rolled higher again and now again resides above the key 50 level, some divergence is showing in momentum and price. 

Comments from last week:  The price structure still remains a consolidation with Friday last week completing a bullish Pivot point with the potential for price to move higher. The 3280 high of the OPd from 7 trading periods back will be the first “go to” level in this Daily chart. The Daily trend remains “UP” with the potential to move back above the short term trend line.

GOLD – WEEKLY
Price structure:
The underlying price structure remains in a Primary UP trend.
The whole world still wants to be “long” Gold, until they don’t.
Rejection of the $2072 high. With 3 very strong weekly ranges, last week saw the first sign of profit taking with the market closing over 30% down in the weekly range.
2015 will become the important “mid range” support level this week.
A break of this level would potentially target the $2000 level now an important psychological level.

Indicator:  Relative Strength
Relative Strength remains very strong now above “70” this is NOT a sell signal only a sign of very strong price momentum. Should the price move into a consolidation period this indicator would be monitored for a divergence signal. ( rising price / falling RSI ) 

Comments from last week: Two very strong impulsive weeks with a high showing of $1980.56. Often the first reaction is to “take profit”, however the closing price at the high suggests a strong hold with Buyers in control. Historically a difficult period for the “longs” holding as the chart indicates after very strong movements a period of consolidation follows. Traders can only monitor the $1980.56 high for a breakout or the Weekly midpoint  of $1939.65 for support.

 

AUD GOLD  DAILY
Price structure:
Last week saw the important breakout over 2765.22, with potential weakness in the AUD this trend looks to extend higher.
While last Friday closed lower any follow through lower should see the $2765.22 level tested. This will require $AUD strength or a decline in the USD Gold price.
Australian Gold players continue to test highs but remain open to profit taking.

 

Indicator:  Relative Strength
With the RSI now rising, the crossover of the 50 level is a good sign upward momentum may continue in the short term. The current reading over “70” is reflective of the strong momentum, but the signal line has moved sideways to lower, this will now be monitored for bearish divergence.

Comments from last week: The 4% move in USD Gold with only a 0.6% move higher in the AUD has propelled the XAUAUD price higher to the AUD $2765.22 resistance level, a very good outcome for the local Gold producers. The high close on Friday from the small pennant is a bullish signal for further gains.  Underlying Primary trend remains “UP” with further gains expected.may be expected in the XAU-AUD price in the coming days. A retest of the $2600 breakout level would be the first target.

 

SILVER DAILY
Price structure:
The continuation pennant has played out and meets the extended price target on a series of impulsive price movements. Last Friday saw some profit taking following a very strong move early in the week.
This week on slowing momentum and any further price decline, look for the intra week breakout level of $26.18 to hold as a sign of price strength. 

 

Indicator: Relative Strength
A divergence signal is developing within the RSI. This has much further to develop before confirmation but remains on watch. Relative Strength can remain over the “70” level for extended period during Bull market runs.

Comments from last week:  The daily chart of SILVER shows the very significant OP (outside period) from last Tuesday. This statistically significant event may have marked the high as consolidation now takes place in the forma of a continuation pennant. Further consolidation is now expected in the coming days as the OP is resolved. The daily $22.90 low is the expected support level in the coming days. With RSI now “rolling”  lower showing the declining price momentum, this is now being monitored for a bearish divergence signal.

 

AUSTRALIAN VOLATILITY INDEX
The decline in volatility is a good outcome for equities in the coming week. Buy traders should be reminded this relative high volatility shows up in daily price movements and high options (ETO’s) prices.

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: Volatility has moved sharply higher as news around the Covid 19 2nd waves grips the market. This is a bearish signal for the equity markets (ex GOLD and Silver). Volatility ranges are now expanding, this is reflecting also in the equity markets daily movements.

 

USD DOLLAR INDEX
Price structure:
Good bullish divergence showing in the DXY following a NFP report on Friday.
Given the retest of the low set 2 weeks ago is complete with a Fake out (FO) and Pivot signal in place, further gains may be expected.

Indicator:  Relative Strength:
RSI shows a steeper move and a further turn lower, below the “30” level, a signal of very weak (positive) price momentum. 

Comments from last week:  With a retest of the MAY 2018 lows the USD Index has posted the first potential reversal signal. (or a short cover into the end of the week). Fridays low of 92.54 (May 2018 low) will be the critical level to hold in the coming days. Only a close over 93.53 would signal a reversal in place, and this level should be monitored in the coming days. A rise in the DXY will place pressure on the AUD and offer a potential further rally in the AUD Gold price.

 

WTI  CRUDE OIL
Price structure: This commodity is news driven.
Dull! Week 10 of consolidation. But the chart is starting to show some signs of a breakout higher with last weeks price probe over the key $42.0 resistance level.
The probing breakout is important as no immediate selling entered the market to break last weeks low.
This chart is starting to look Bullish.

 

Indicator: Relative Strength
Relative Strength has remained over the 50 level, having set a lower high point followed by last week’s sideways move, a sign of price consolidation.

Comments from last week: The tyranny of 9 Weeks of consolidation, with no lead for Oil stocks or traders of Oil stocks. Last week posted a lower high and lower low, setting up a potential “Bullish flag” pattern, but may take weeks to play out. The important observation is the price structure remains Bullish.