Black and White Technical Report: The Week Beginning 13/09/2021

Last week saw all of the US indices’ set key reversal signals, this has NOT changed the underlying Primary UP trends in place but will place traders on alert for potential further declines.

A close inspection of the US and Australian charts show large range bar reversals within the daily and weekly charts.

Primary trends can take many months to change and volatility of daily price ranges are a key indicator the market could be moving to further risk-off.

The change of sentiment to risk-off has moved across to the metals markets as Gold and Silver remain stubbornly within multi-month trading ranges and risk retesting lower levels.

Copper and WTI Oil have set bullish reversal patterns but still remain within a trading range.

 

XJO WEEKLY    
Price structure:
Since the February lows of 2020, the XJO Index has not put in a reversal of the type that has developed in the past 4 weeks. During the close of last week, the market saw weakness in the banks with some closing strength in the resources. However, close inspection shows last week has set a 6-week closing low with the Relative strength reading a 3 month low a, b, c type retracements are a Bullish pattern, to confirm this the Index value would be required to regain the 7530 levels with a strong close to confirm the Buyers are in control.

 

Indicator: Relative Strength 14
RSI has remained, below the 70 levels after negating the potential momentum divergence signal, but as mentioned has set a new 3-month low reading. The RSI should be monitored for a continued move below the key level of 70 to show a shift lower in price momentum.

Comments from last week:  The pivot point set three weeks ago is still very much in play with the current resistance level at 7530 remaining in place, technically helped by the ex-dividend effect of the past week. The underlying primary trend remains UP as the trendline is further tested in the past week. The underlying market sentiment remains positive, with some very positive moves the financials and large miners, this could be expected to continue in the coming week. 7197 remains the long-term support should a retracement take place. 

 

 

XJO DAILY  
Price structure:
A significant impulsive price move following many attempts to break out over 7530, the most important observation is the “retest” of the breakdown level at 7430. What could have been a breakout higher has failed and the breakdown is now underway. Traders would watch the short-term resistance of 7430 for further selling, in the coming days. This 7430 level will provide the first signal for the long-side traders that the lows may have been set. 

Indicator:  Relative Strength 14
The Relative Strength Indicator 14, shows the sharp upward price momentum, following last Thursday’s sharp decline. With the indicator remaining below the key 50 levels this would be monitored for further weakness. 

Indicator: VOLUME
High volume on last Thursday’s impulsive indicates stress selling with little interest (low volume) on the following Friday.

Comments from last week:  The Daily chart shows the clear development of resistance at 7530, with last Friday closing in on the highs, this level should be broken higher in the coming week on current positive market sentiment. The observation of last Thursday’s low retesting the 3 bar triangle lows is a bullish signal, however, for this week, 7400-7450 is the key support area this week on any price weakness. Key to the Index moving higher will be the large caps BHP WES CSL and Banks remaining positive.

 

S&P 500 WEEKLY
Price structure:
Last week saw a large range bar (reversal) testing the lower parameter of the Wedge pattern. This type of movement is common within this Weekly chart, a follow-through and breakdown of the wedge would set this apart from other previous observations and attract further selling with the potential to see 4320 tested in the coming week. The underlying Primary trend remains “UP”.

Indicator:  Relative Strength Indicator 14
Relative Strength has again moved below the 70 levels, in line with the underlying price decline. The Sell line is shown around the 65 levels. It can also be observed that the RSI can track sideways over the “70” level as price creep/consolidation takes place.

Comments from last week: The grind higher continues for the S&P 500 as the smaller industrials component finds buyers. The overall “wedge” pattern persists, this type of bearish structure when broken can lead to significant declines, however, for this week first support is identified at 4320 should a decline take place. Although the market is grinding higher the key observation is the open/close ranges remain very small for the past 6 weeks showing a lack of real commitment from the Buyers.

 

S&P 500 DAILY
Price structure:
Last week’s commentary mentioned a large range reversal could be the first observation of an overall reversal in price trend. Last Friday the S&P traded a large range bar also breaking the tentative trendline and the small support area of 4464. This type of committed selling clearly has the potential to follow through lower in the coming days. To remain Bullish price must close above the 4464 levels to regain buyer confidence. A small price GAP is showing at 4444.0, this level should be monitored for price reversal patterns. A breakdown to 4367 would place the S&P into a trading range environment.

 

Indicator: Relative Strength 14
The RSI move along the 70 levels is showing slowing momentum, a move below the 50 levels would indicate a loss of price momentum and would be viewed as a signal to retest the support levels at 4444 – 4367.

Comments from last week:  The same observation of short trading ranges can be seen following the move higher from 4460 support. This market remains on high watch for a reversal to retest the 4460 levels in the short term the 4536 levels are required to hold to maintain the buyer’s confidence. There is NO reversal signal provided in this market in the Weekly or this Daily chart other than the current small ranges to keep traders on alert for weakness. The reversal will come in a large range trading session to the downside as the first key observation of any committed selling.

 

NASDAQ DAILY
Price structure: This Index is the most concerning for traders
This key (large range) price reversal has broken 15534 short-term support. The lower levels of 15184 at the short-term trend line are now the key level to hold on to further weakness. A retest of the initial breakout at 15184 could be viewed as a bullish consolidation, putting this as the level to hold would alert the trader to a potential retest of the lower trend line on price weakness below this now key level.

 

Indicator: Relative Strength 14
The Relative Strength Indicator has turned lower last week. No real signal can be gleaned from the RSI until a movement below the 50 levels, however, the BEARISH divergence remains and may signal a short-term top is in place.

Comments from last week: Unlike the other US Index’s, the Nasdaq has maintained some strength in the daily ranges with last Friday posting a new closing high from the developing support at 15534.0 level. This level is now the key level to hold in the coming days for the Buyers to remain confident. Price has accelerated away from the tentative and long-term trend lines, a reversion type of retracement could reasonably be expected on a closing price below 15534.0

 

USD Spot GOLD – DAILY     
Price structure:
Comments from last week have clearly been wrong, with Gold rejecting the $1834.0 level with an impulsive price movement lower to again find support at $1788.0. The trading range developing similar to the June – July period this year could be a bullish signal IF the $1788 level holds. The final trading days of last week indicate this level may not hold with the prospect of a further price test of $1764.30 underway.

 

Indicator:  Relative Strength 14
The Relative Strength moving below the 50 levels is heading back to the 30 levels, a signal of decreasing price momentum, and should again be monitored for a further move lower.

 

Comments from last week:  Gold remains one of the best “technical” charts for the week and highlights the importance of identifying key support and resistance within a price chart. Friday night’s close saw the $1834.0 level again tested as part of a continuation price move from support at $1788.0. Gold traders have the opportunity to retest the $1916.40 high price area. A further breakout higher could be expected following Friday’s “impulsive” (large range) bar, in this event traders would look for a “retest” of $1834.0 as a signal for price support.

 

SILVER DAILY    
Price structure:
Commentary around Silver from last week is also clearly wrong with the further immediate rejection of the down trend line and failure of the Strong close of Friday 2 weeks ago to follow through higher. This chart has again turned bearish in line with the existing Primary downtrend from the May 2021 high price area. The OPd (outside period) is often a turning point following an extended price movement. The current 5 bars of price decline do not fit this requirement. A strong close over the down trend line is required to shake the sellers who have again taken control of the price action.

 

Indicator:  Relative Strength 14
Current Relative Strength is now viewed as lost upward momentum, with the cross below the 50 levels.

Comments from last week: Silver has also put in an impulsive price bar and is currently retesting the short-term down trendline. The short-term price structure looks very bullish for further gains to retest resistance at $25.52. As the larger view shows Silver remains within a broad trading range with $23.00 support and $28.40 resistance, traders could expect a retest of the high in the coming months should the momentum remain positive.

 

AUD GOLD DAILY    
Price structure:
The current trading action of $AUD Gold is described as a secondary reaction (overlapping price bars), this is often a bullish signal. The a,b,c type retracement is also confirmed with the current retracement, also bullish. 2477.0 remains the key resistance level for price to cross. $AUDXAU remains within a large consolidation pattern, however, there is potential for the current retracement to set a new higher low as a precursor for a breakout higher to test the $2541.0 level.

 

Indicator:  Relative Strength 14
Relative Strength moving back below the 50 levels is in line with price movements. Price momentum has again turned negative, further declines in price will see the RSI decline further, however, look for further gains in this reading to underscore any strength in price.

Comments from last week:  The $AUD and GOLD has developed into an a, b, c type of retracement (Bullish) as the $AUD gains strength now at 0.7430 although $USD Gold has traded higher. Last week a breakout higher was expected, the chart structure remains positive and within a trading range.

 

COPPER DAILY   
Price structure:  LME Inventories still remain historically low.
Last week saw a significant price movement higher in Copper as the price closed above the $4.33 level to close in on the $4.50 level. Copper still remains within a trading range, the a, b, c retracement now looks complete and will only be confirmed with a close over the “b” high price of $4.61. Traders should monitor the $4.33 level for support on any price decline, however, the closing price in the high part of the weekly range is a bullish signal for further gains.

 

Indicator: Relative Strength 14
In line with the weekly price gain closing on a 5-week high, the RSI has turned higher and remains above the key 50 levels. 

Comments from last week: Copper set an Inside period up close (IPu) showing the market in the balance following the a, b, c type retracement. This is a good indication the retest of the $4.00 level is complete. Going forward $4.00 will remain immediate key support.

AUSTRALIAN VOLATILITY INDEX
Last week’s comments stated, “Volatilities can change very quickly on news items and trader sentiment.” Last week’s higher reading may be the first signal of a risk-off event in the equities markets approaching.

The tenant that states low volatility precedes high volatility has held true.

Risk insurance IS being priced into the premiums as forward options are being priced higher. 

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 forwarding 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 remains benign (read positive) for Australian equities, the forward premium for PUT options remains in line with the underlying time to expiry values.

 

USD DOLLAR INDEX  
Price structure:
With the Index failing to test the 91.66 level the strong reversal from last week has ended the week as a developing Bullish flag pattern. Should a further price decline to the 92.07 level take place the pattern is viewed as weak and a further breakdown could be expected. But this chart has the potential to put in a higher low point in the coming days prior to a further retest of 93.18. The DXY remains within a trading range.

 

Indicator: Relative Strength 14
Relative Strength bearish divergence is playing out with moves below the 50 level. Momentum now remains negative. As the Relative Strength remains negative, further declines on this loss of pricing momentum could be expected. The Relative Strength needs to cross the 50 levels to remain bullish.

Comments from last week: The observation for the DXY shows a trading range is developing between 91.66 and a resistance of 93.18. Friday close at 92.07 is indicative of some short-term daily support, however, the loss of momentum indicated in the Relative Strength Indicator is suggesting further declines below this intermediate support level to further test 91.66.

 

WTI CRUDE OIL
Price structure:  This commodity is news driven by supply-demand.
Last week saw a 2nd retest of the $66.00 level a good signal of support developing at this level. The OPu from 3 weeks ago has continued to hold the price structure. WTI oil remains within a trading range from $61.80 to $75.20. The current price structure would suggest a retest of the $75.20 level is underway. 

Indicator: Relative Strength 14
RSI set a sharp reversal from the “30” level to reach 50, look for a further rise in this indicator as confirmation of the underlying Bullish view in the current price action.

Comments from last week: Last week the lower shadow of the price bar “retested” the $66.00 level with a close back towards the high of the week. The Outside period (OP) of two weeks ago is playing out as the low “marker” and key support following the a, b, c type price retracement. A bullish signal can be derived from this price action, a retest of the $75.20 high is underway. This view will be negated on a daily close below the now key level of $66.0.