Black and White Technical Report: The Week Beginning 20/07/2020

“Never short a dull market”, a market truism about to be tested in the coming week/s.

The past week has been one of further consolidation.

While the Reserve Bank is pumping money at one end, the corporate leakage at the other has kept markets in balance in the past week.

The World contemplates a 2nd wave of Covid19.  A 2nd lockdown may see significant reversals in markets as the VIX (forward volatility) rises in anticipation.

Gold pushes to new highs with Silver testing $19.0oz and building a bullish pattern for further gains.

WTI Oil remains below a significant resistance level for another week.

 

XJO WEEKLY
Price structure:
Another short range IPu (inside period)  week, more importantly for the bullish view, the week has closed above the mid range within the unfolding Secondary movement. These consolidation periods are an important development within Primary trends.
6200 remains the Weekly resistance level of interest.
Underlying Primary trend remains UP.
 

Indicator: Relative Strength
Relative Strength, again still nothing to see here, sits at the “50” level, but pointing UP, suggesting a balance in price momentum remains.

 

Indicator: MACD
MACD remains a swing “buy” signal

Comments from last week: The weekly closing price below the Midpoint of the 5-week range, could be viewed as a Bearish signal, however with the range being an Inside week the consolidation should continue sideways, overall bullish picture. A close below the 5700 level would signal a top in place while a close above 6200 would signal a bullish move underway. This is the most likely outcome given the bullish price structure of this consolidation period.

XJO DAILY
Price structure:
The 3rd higher low (3HL) is now confirmed, last Wednesday’s strong movement higher followed by Thursday, Friday remaining within this range is setting up a bullish breakout. The pattern developing from the 1st week of June is now complete ( 3 lows). A good setup for a breakout higher. Short term traders would be on guard for a Bull-trap movement (reversal) from the first break above 6200.

 

Indicator:  Relative Strength
RSI has moved sideways above the 50 level showing balance in momentum, the move higher is the signal for increasing positive momentum.

 

Indicator:  VOLUME
On any significant price movement, volume will be an important indicator of market commitment for that direction. A breakout high must be accompanied by higher Volumes.
During June – July there is an overall general decline on trading volumes, while not immediately bullish, consolidation volume patterns often decline during this phase of development.

Comments from last week:  The descending pattern remains intact, and has been extended to include the new Higher low at (3). This signals the coming completion of this type of pattern. With volatility falling a bullish breakout is imminent.

 

S&P 500 WEEKLY
Price structure:
The Weekly candle of the S&P is marked as #3 type, this is often a warning of price weakness 1 or 2 weeks in advance. While the market can trade higher in the coming week evidenced by the strong close of last week, the GAP remains the area of significance in the coming week.
When this price area has been resolved the following price direction can be decisive.

 

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.
Look for a move below this 50 level as a signal of bearish momentum.

Comments from last week: The close above the “midpoint” of the current trading range 2 weeks ago has followed through with a short range bar closing at top of its range. A good signal for further gains to test the 3210 level with the higher GAP fill a possibility in the coming weeks. The Primary trend remains UP, with a potential retest of the 3350 highs underway.

 

S&P 500 DAILY
Price structure:
Last Monday’s gap opening rejection indicates a level of sellers, while Tuesday made an impulsive move higher the closing of the week remains weak with 3 Doji’s in place.

Consolidation at 3210 resistance is the key feature for the coming week.
Low volatility often leads to high volatility (John Bollinger) may be the order for the coming week.

 

Indicator: Relative Strength
RSI signal line has rolled lower again but remains above the key 50 level, a divergence is showing in momentum and price. This is not a trade signal, however the RSI should remain high when and if price moves higher.

Comments from last week:  A consolidation week above the top of the Bullish flag now completed. Thursdays OPd has been overcome with a strong close on Friday. The small Gap from the “island top” is closed with resistance at 3210 now in play (see also Weekly note). The past week has been one of confusion in price discovery with the mixture of positive and negative closes. But Friday’s closes may lead the way out of this trading range.

 

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 remains on an extended move higher; I have overlayed the Bollinger bands as a guide to how strong this commodity remains.

What’s to be observed is the past 10 weeks have remained above the 20 period SMA (middle) average, while remaining inside the upper band, all good! for now.
The Bollinger bands are slightly opening again as a reflection of current price volatility.

$1745 remains key support in the coming week.

 

Indicator:  Relative Strength
Relative Strength remains positive above the “50” level and has made a new high in line with the price chart. This sets up the potential for continued bullish RSI signal. It should concern GOLD traders; the Relative Strength is not making overall new highs and remains a divergent signal.

Comments from last week: Good long price range week, with a not so strong close on Friday, $1745 remains the support level to hold on any price weakness in the coming week.

 

AUD GOLD  DAILY
Price structure:
SIGNIFICANT resistance at $2600 will be the key in the coming week, Gold in Australian dollar terms is at risk of breaking down lower as the $AUD becomes stronger.
$2563 will be the daily level to hold as support, with a solid close over $2600 would remain bullish for the local Gold producers.
 

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. However, Traders should monitor this level for weakness and a potential move below the key 50 level.

Comments from last week: The Australian Gold price is at risk of a stronger Australian dollar capping overall price, while the USD Gold price is trading higher for the week and at a 9 year high, The Australian dollar Gold price remains well below the April – May period. The developing bearish wedge is at risk of breaking down lower below $2520.00 the key support level.

SILVER DAILY
Price structure:
Silver is an Industrial metal and will be responsive to improving economic news.
The breakout over $18.45 remains strong with a potential Bullish flag building at the right hand edge of the Daily chart.
Of concern is the sharp down turn of the RSI (see below), the result may be several day’s of retracement to “retest” the $18.45 level.
An important level to hold in any price weakness.

 

Indicator: Relative Strength
The Relative strength Indicator has negated the “swing sell” signal. The current move higher over the 70 level is not necessarily a bearish signal, but should monitored. The RSI over 70 is a reflection of underlying strong price momentum. The current turn lower is of some concern in the short term following the recent price run higher.

Comments from last week: The daily chart of Silver has made the breakout move above the $18.40 resistance with last Friday, “retesting” this level as the inevitable profit taking takes place. Wednesdays strong price move is a decisive action in the underlying UP trend. Overall higher price target remain at $20.00  

The daily chart of Silver has made the breakout move above the $18.40 resistance with last Friday, “retesting” this level as the inevitable profit taking takes place. Wednesdays strong price move is a decisive action in the underlying UP trend. Overall higher price target remain at $20.00

AUSTRALIAN VOLATILITY INDEX
Not a great week for volatility as the reading moves higher to 20.65 a sign of increasing concern around Global events of Covid19.
Equities have been under some pressure (read consolidation) as volatility increases.

This is one indicator to watch in the coming week, a move higher would put further pressure on equities, a move lower would see price breakouts.

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:   An XVI over “13” is generally bearish for equities. However this current decline is a move in the right direction.

 

USD DOLLAR INDEX
Price structure:
Big level of support approaching for the US Dollar index, a breakdown below 95.71 could be a strong bear signal for moves into the 95 and below area.
The DXY remains in a Primary down trend.

Indicator:  Relative Strength
RSI shows a flattening move and a further turn lower, below the “50” level, not a sign of strong momentum. 

Comments from last week:  Strong closing price support at 96.40 with a “fake out” (FO) bar setting a bullish start to the week. Look for a retest of the 97.75 level. Should the Index break the lower support of 96.40 a retest of 95.5 support is the forward target.

WTI  CRUDE OIL
Price structure: This commodity is news driven
Nothing to report here, another week of consolidation below the key $42 level, again I will remind readers, “low volatility leads to high volatility”.
The primary trend remains down, however the ascending nature of this consolidation may lead to a breakout higher back into the channel find $42.0 as support and $60 as resistance.

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:  OPEC over the weekend announced the relaxing of production output, believing the restarting of economies will lift demand. The ascending series of 6 weeks of consolidation below the $42.00 support / resistance level sets up a breakout to higher prices. The OPEC news may dampen this observation. However the underlying price structure remains Bullish.