Black and White Technical Report: The Week Beginning 14/09/2020

Uncertainty is sweeping across Global markets, Brexit has become news again, second wave Covid in Europe, US FANGS stocks correcting with US employment stalling and Australia still closed for business. Markets have a risk off with get answers later discounting movement sweeping major indices.

 

Even with the US Fed reserve stating they will let inflation “run unchecked” it needs be failed to get a bid into Gold and Silver. Long term holders are hopeful, short term traders are hopeful of a move higher, the chart tells a different story.

Oil fails at a critical level with key support levels dollars lower, the reasons are unclear, oversupply, less miles being driven during pandemic closures, a bid cannot be found.

 

 

XJO WEEKLY
Price structure:
Last week saw the index continue to move below the “midpoint” of the current secondary movement consolidation. The expanded range bar is bearish and indicates the potential for further declines. The weekly support level at 5720 is the first target in this current decline. Over-all the Primary trend remains UP, overall however these consolidation periods can last for MANY months.

 

Indicator: Relative Strength
Relative Strength, again maintains the dip below “50”, this is not a great look for the Bulls in the market. Further consolidation in the price chart may this this dip further below the key 50 level targeting the 30 level.

 

Indicator: MACD
MACD remains a swing “buy” signal, This week has continued with a further dip in the fast line now closing in on the slow signal line, only reflecting the slowing momentum. A cross over would be the Sell signal.

Comments from last week: Last week saw the closing price below the middle of the consolidation range, a signal for further weakness in the coming week. The weekly range is also larger than 2 weeks ago indicating an increase in downward momentum. 5720 will be the significant support level to hold this week.

 

XJO DAILY
Price structure:
A picture of fundamental and economic uncertainty. Increasing volume on the down days indicates a distribution pattern underway, Last Wednesday’s large range is a very bearish signal in the short term for further declines. 5720 remains the downside target as the baseline of this consolidation pattern now entering its 4th month. The current “descending wedge” pattern can be a bullish structure, however when trapped inside this consolidation area carries less influence in the price structure.

 

Indicator:  Relative Strength
RSI has turned lower again in line with the chart price movement putting in a lower high a signal for further momentum losses as the indicator moves below the key 50 level, and remains at risk of again dipping below the key 30 level.

 

Indicator:  VOLUME
Volumes continue increase on the “down” days, this is of concern as it suggests distribution not accumulation. Significant volume increases need to show on the up days to confirm the longer term bullish view.

Comments from last week:  The daily chart has now set a new “lower high” with Friday closing on the weekly low. Immediate follow through should occur today, with the MAJOR support level shown at 5720 the downside target.

 

S&P 500 WEEKLY
Price structure:
With the follow through lower, it is noted last week was a smaller “range” showing a less decisive sell from the bears but confirms a reversal pivot point. The small “gap” area will be the first point of interest in any further decline. The preferred observation is the beginning of a consolidation area above 3200 and below 3500 points. Primary trend remains UP.

 

Indicator:  Relative Strength Indicator
Relative Strength turning lower is simply a reaction calculation of the weeks price range. There is not much to glean from its position as the prior move was not over the “70” level. A move below the 50 level is a signal of bearish momentum.

Comments from last week: A significant liquidity event has taken place in the US leading FANG stocks driving the markets first to a new high below a volatile sell down. The large outside range will take an equally powerful move to overcome either the high or the low of the range. This type of large outside range price movement is often the shock and awe event to mark the high of an underlying price move.

 

S&P 500 DAILY
Price structure:
The first signs of consolidation showing in the Daily chart along the 3350 level. Many false short and long signals can be observed in the short term making it difficult for the day trader.  However the current pattern is not a Bearish sell signal, the current take profit has further to develop before the Bears take control. Further consolidation would be expected, with 3500 the upper breakout level and 3200 the lower support level in the coming days.

 

Indicator: Relative Strength
Relative Strength has again turned lower and at risk of crossing the “30” level. Traders should be aware that the RSI crossing the 30 level does not generate a buy signal. As this type of price consolidation can last for many months.

Comments from last week:  The Gap open on Wednesday became the bearish signal for a sell watch. Thursday large range provide follow through to Friday’s low. The low found an important support level at 3350, the pivot point low 3 weeks ago. This may considered a bullish support move and will encourage the buyers in the coming week. Well it only took one day to significantly move the RSI to the “50” level. I would expect this market to consolidate in the coming week,

 

USD Spot 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. Gold continues to consolidate along the key level of $1939.65. The current pattern would suggest a breakout higher, however after the recent July exponential move into the highs this market will need SIGNIFICANT news flow to push to a new high.  As these consolidation patterns develop the shorter term traders will start to liquidate as better opportunities develop elsewhere. Traders should be aware a break of the current trend-line would be a significant event and potential precursor for further selling.

 

Indicator:  Relative Strength
Relative Strength remains strong but has now turned sharply lower to move below “70”, this can be monitored to remain above the “50” level, as the instrument finds consolidation. Further selling below last weeks low may see a complete loss of positive momentum. 

Comments from last week: The weekly Gold price has closed below the closing price support level of $1939.65 developed over the past 3 weeks, this is a signal the bullish are weakening. Trader would monitor a break of the short term trend line as a sign of further selling. From a price pattern observation the current structure can be described as a continuation pennant, a breakout higher would be decisive for the buyers and force a potential short cover event.

 

AUD GOLD DAILY
Price structure:
Current price movement not display any conviction for a directional move in the coming week other than further consolidation. This last week can be seen as a bearish pattern, but remains within the larger consolidation below $2765.22 and above $2600. The marked up a,b,c? pattern is shown with the “c” wave yet to fully play out. This will not work out well for the larger Australian listed and producing Gold stocks, with many well down of the recent highs. (Not to be confused with the speculative Gold play’s.)

 

Indicator:  Relative Strength
With the RSI now falling, the crossover of the 50 level is a bad sign upward momentum maybe at an end in the short term. The flag breakdown would see this indicator move further below 50 showing bearish price momentum.

Comments from last week: Australian Dollar Gold price movement do not reflect the underlying USD Gold price as the $AUD continues to hold strength. Taking a combination of weak USD (see below) leading to a higher AUD, the $AUD Gold price will continue to decline. The has significant implication for the larger producer Australian listed Gold stocks. The daily price chart is within an a,b,c corrective movement down, with next support at $2600.

 

SILVER DAILY
Price structure:
A similar but different picture to the Gold chart so many continue to hold. This Daily view of silver shows how the exhaustion highs can simply lead to long consolidation periods. Very small daily price ranges along the $26.18 support level shows lack of conviction. A price break below this support level would bring the short term holders to sell on stops. The favoured outcome is a retest of the long term trend line currently at $22.00.

 

Indicator: Relative Strength
The divergence signal from 3 weeks ago has played out in the current price decline. With RSI now below “70” but remaining above “50” the bearish flag and current Bullish flag may again simply develop into further consolidation pattern.

Comments from last week:  The daily price of Silver is now trapped between support at $26.18 and Resistance shown at $27.55. This consolidating market can break either way, for a breakout higher significant bullish news will be required. The current consolidation has both the buyers and the sellers trapped, expect the next move to be volatile.

 

COPPER DAILY
Price structure:
The current breakout above the $2.98 – $3.0 level is holding with 2 intra week retests of this level. The weekly candles with the long lower shadows while closing towards the highs are the first sign a consolidation of price may occur along this important $3.0 price level. The next resistance level shown at $3.20 remains the preferred upside target. On the fundamental side Copper remains at risk of a supply shortage.

 

Indicator: Relative Strength
Relative Strength has moved strongly over the 50 level and now 70 level in the past 12 weeks. The higher levels only continue to reflect the current strong upward price momentum.

Comments from last week:  A solid breakout of the inside period of 2 weeks ago, with the range closing towards the high of the week. This type of bar with a longer lower shadow is a sign of weakness to come in the nest 1-2 weeks. A retest of the $2.98 breakout level could be expected prior to an extended move higher.

 

AUSTRALIAN VOLATILITY INDEX
Rising volatility and falling equity prices. Volatility levels continue to reflect the liquidation event in the Nasdaq.

Uncertainty around future economic growth and financial stability will keep levels elevated for some time to come.

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:   A large jump in XVI volatily value last week as the US markets went into a “longside” liquidity event. A rise in the XVI displayed last week indicates “PUT” option protection is taking place. This protection is taken to insure against any further downside movement in equity prices.

 

USD DOLLAR INDEX
Price structure:
It seems the whole world is consolidating, the USD index remains within the defined boundary resistance at 93.75 and support at 92.10.

This consolidation is playing out in the Gold index and remains the greatest threat to the equities market. Commodities players are looking for a weaker USD to support metals prices. While a stronger USD would pressure the economic recovery in the US as goods and services become more expensive.

Indicator:  Relative Strength
RSI   Bullish divergence remains.

Comments from last week:  A spike below the 92.10 saw instant buying enter the market, the US Fed is still playing the potential inflation card.  But a close look at the daily chart with a series of lower highs in place only shows a lack of interest of further buying. This index remains at risk of breaking down below 92.10, look for a daily close below this level as a follow on from the LH? Point.

The RSI noted below suggest upside momentum in the daily bars / candles. This type of momentum should be watched closely for a breakdown to the 30 level.

 

WTI  CRUDE OIL  Price structure:
This commodity is news driven around supply demand.
The ascending pattern has moved into breakdown, the intra week support at $35.80 will be the key level to hold in the coming days.
A breakdown from this level would be at risk of continuing the already in place Primary down trend in to a retest of the  2016 support level of $29.20.

 

Indicator: Relative Strength
No signal was provided in the RSI prior to last weeks move, the indicator has quickly moved to the equilibrium level of 50. Further weak price momentum will be evident should the RSI move lower.

Comments from last week: Last week saw that volatility play out to the downside, with a large range week taking out the previous 8 weeks of meager gains. Traders would look for a follow through move in the coming week as momentum is now clearly to the downside. A further capitulation move would see the $29.20 – $30.0 range tested.