Black and White Technical Report: The Week Beginning 17/08/2020

Major Indices’ floated higher for the past week on easy FED money against declining earnings.

The most important market in the world, the S&P500 briefly posted an all-time daily high, this market is now at the tipping point of a significant breakout or retest of lower levels.

The real threat to the Australian market heavily weighted by the 4 Banks is the debasement of the Australian property market.

Gold and silver suffered the short sharp profit taking, pointed out last week, these markets look set to go into a consolidation period.

Week 11 sideways in the dullest of futures markets at the moment, Oil, probing above the key $42.0 for buyers, this week some were found, but not enough for a breakout higher.

 

XJO WEEKLY
Price structure:.
A good move in the past week to remain above the “midpoint” of the secondary movement range ( high 6200). This sets the market on a Bullish path, with a potential breakout above this key 6200 level.

Last week set a bullish “pivot point” with the “low” of 2 weeks ago being a higher low in this now ascending pattern.

 

Indicator: Relative Strength
Relative Strength, again week 11, momentum has taken an upturn as the indicator rises off the 50 level, a good precursor for further momentum price gains. Further consolidation in the price chart may this this dip below the key 50 level.

 

Indicator: MACD
MACD remains a swing “buy” signal

Comments from last week: 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.

 

XJO DAILY
Price structure:
A clear bullish flag developing in the “Daily” chart, a good development from the pivot point reversal. Traders would look for a breakout over 6200 in the coming days. Underlying bank stock will need to do the heavy lifting for this potential outcome. Mining stocks, in particular FMG have had a great run and may weigh on the index in the early part of the week.

 

Indicator:  Relative Strength
RSI has turned higher again in line with the chart price movement a good signal for further momentum gains.

 

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:  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.

 

S&P 500 WEEKLY
Price structure:
Last week saw the index push into a new high but close below the Q1 2020 closing high. This should be of some concern in the short term as the weekly “range” of the candle is shorter than the previous week showing a slowing momentum. Key levels in a potential retracement situation are shown at 3328, and 3210.

 

Indicator:  Relative Strength Indicator
Relative Strength turning sideways from above the key 50 level last week is sign of a slowing 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 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.

 

S&P 500 DAILY
Price structure:
The daily movements have clearly “flattened out” at this key historic resistance level.

The outside bar on Tuesday has the potential to mark a short term high in place. A retest of 3210 would be a healthy retracement in the coming days.
At best further price consolidation at this level would be ideal for a breakout higher in the coming weeks.

 

Indicator: Relative Strength
RSI signal line has rolled LOWER there is now some divergence showing in momentum and price movement, this should be monitored in the coming week. 

Comments from last week:  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

 

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.

From last week. “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.”

The Weekly chart of Gold now shows a “pivot point” reversal, initially trading below the key midpoint of 1939.65.
The weekly close above this level is an important sign of key support.
This weekly chart price chart is now at risk of going into a consolidation period as the buyers find their confidence again.
Further selling below last weeks low ($1863) may see a retest of the initial breakout at $1700.

 

Indicator:  Relative Strength
Relative Strength remains strong but has now turned sharply lower, 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: 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.

 

AUD GOLD  DAILY
Price structure:
A resilient Australian dollar against a falling $USD Gold price has seen a sharp corrective movement in this AUD Gold price below what could have been substantial support at $2765.22.
The developing Bearish flag with the Wednesday low being the retest of the $2600 level shows price is at risk of moving lower in the coming days.
This will have implications for Australian Gold producers large and small. SAR, NCM and NST charts are at risk of moving lower in the coming days.

 

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 movement from above the “70” level to dip below “50” is not a great sign for improving momentum. The flag breakdown would see this indicator move again below 50 showing bearish price momentum.

Comments from last week: 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.

 

SILVER DAILY
Price structure:
The current price weakness in Silver failed to find support at past key levels. In particular the $26.0 price point (second last HH). With a bearish flag developing, a breakdown would target the longer term trend line around the $22.0 level.
The large down range shown on Tuesday clearly indicates a panic take profit from the late comers into this market.
At best a further consolidation pattern may develop. Traders would monitor last Wednesday’s low as a potential price failure point. 

 

Indicator: Relative strength:
The divergence signal from last week has played out in the current price decline.
With RSI now below “70” but above “50” the bearish flag may simply develop into a consolidation pattern.

Comments from last week:  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. 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.

 

AUSTRALIAN VOLATILITY INDEX
The current “volatility” within the Volatility index has shown a consolidation period over the past 7 periods. Equities remain constrained while this indicator remains at these levels.
The good news is the value is slowly falling, the risk is a rising value will place further pressure on equities in the coming weeks.

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:  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.

USD DOLLAR INDEX
Price structure:
Further “secondary” consolidation has shown up during the past week, below the key 93.75 level. The only consoling factor in this chart is the “low of the past week has not been broken. A further decline may assist the $AUD to higher values placing pressure on the $AUD Gold price.

Indicator:  Relative strength:
RSI shows a Bullish divergence from price momentum. This type of signal is highly reliable but may take several weeks to play out.

Comments from last week:  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.

 

WTI  CRUDE OIL
Price structure: This commodity is news driven.
Last 2 weeks the “probe for buyers” has resulted n a further move above the key $42.0 level. The ascending pattern has the potential to see WTI retest the $50 level. The high volatility from early Q2 2020 has led to an expected period of “low volatility”.
However the structure remains bullish for further gains.

 

Indicator: Relative Strength
Relative Strength remains in a divergence phase, however the moving sideways above the 50 level is a good sign that negative price momentum is missing from the price chart.

Comments from last week 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.