Black and White Technical Report: The Week Beginning 08/02/2021

Black and White Technical Report: The Week Beginning 08/02/2021, FP Markets

Markets continue to provide Technical reversal signals as they push higher on QE stimulus here in Australia along the US and Euro regions. 

Impending hedge fund failures have been brushed to the side as traders again focus current volatility moves with underlying Primary trends. 

The most developed theme so far for 2021 is commodities prices, in both the precious metals sector and Rare earths miners also getting bid higher.
The US Dollar index has broken out of a multiyear down trend and remains on cusp of turning Bullish, this will have implications across the equities, commodities and FX markets should this turn fully bullish. 

Gold and Silver have failed to catch a bid following last weeks spike with both commodities again resting at key support levels.

 

XJO WEEKLY
Price structure:

Last week set a large range Outside period up close (OPu), with the low breaking the trend line before prices responded higher to set a new high. This second OP in 2 weeks highlights how undecided the market is about this current Bullish trend. The two OP ranges have an extremely high correlation to marking a market top within the next 3 periods. To confirm this, a further closing price below last week’s low of 6517 would be required. The event of RBA providing QE into this market can make reversal signals difficult to work with. BUT trader sentiment may change on a breakdown of support levels, the most important at the moment is 6430. 

A new tentative trend line (2 points) has been added.   

 

Indicator: Relative Strength
The RSI indicator has remained over the key 50 level, last week turned higher, a sign of changing price momentum. This should be monitored for a move below the key level of 50 to show a completed shift to bearish momentum.

Indicator: MACD
MACD remains a swing buy signal, again this highlights how slow this indicator can be in a fast market. It should be acknowledged this indicator can be very slow to react on a weekly basis and may continue to track sideways in the coming weeks as it did during 2019.

Black and White Technical Report: The Week Beginning 08/02/2021, FP Markets
Comments from last week: Last week posted an (OPd) “outside period” down close, when found after an extended run-in price can be the catalyst of a downturn in prices to find support. The high of 6832 will be the key resistance level in the coming weeks. The large range week has taken out the 6670 support level and all gains since November 2020. A very high probability of follow through in the coming weeks. 

The next key support level is 6430 points.

 

XJO DAILY
Price structure:
A new Daily price support level has emerged at 6765 with the daily resistance high from 25/01/2021 shown at 6837. 

Last Friday’s close over this level remains a positive signal for further gains. 

A large range week with a test reject at 6510 can provided the spring to ultimately test the February 2020 high of 7160 points.

Price range volatility is increasing, traders should be taking advantage of the volatility with precautions taken on position sizing in the market.

 

Indicator: Relative Strength
4 weeks ago the bearish momentum signal was negated. 

RSI has made a quick movement to the 30 level before again responding to move over the key 50 level restoring positive price momentum.

 

Indicator: VOLUME
High volumes are returning to the UP days, moving the market from distribution to accumulation.

Black and White Technical Report: The Week Beginning 08/02/2021, FP Markets

Comments from last week:  The Daily chart of the XJO now displays a classic “bear trap” only seen in hindsight, but an important observation when developing a view of current market price action.

Last Thursday’s “impulsive” movement has been followed by the retest of the initial breakdown below 6765.

With a momentum move now underway support at 6510 is the next critical level to hold in the coming days.

 

S&P 500 WEEKLY
Price structure:
Last week posted a strong range to close at a all time high, it should be noted the Relative strength indicator has not confirmed the advancement as a bullish move.

It should be noted the market is in a “high place” and at risk of profit taking, first key level on any retracement will be 3725 and 3600 remains the key support level for any significant retracement.

Primary Trend remains UP.

  

Indicator:  Relative Strength Indicator
Relative Strength remains above the key 50 level and has set a Bearish divergence from price. This not the same but remains very similar to the Jan Feb 2020 divergence setup and continues to play out.

It should be acknowledged the RSI has remained above the 50 level for the past 6 months.

Black and White Technical Report: The Week Beginning 08/02/2021, FP Markets

Comments from last week: Most major indices’ have posted an Outside period down close, in the past week following strong gains. Last week’s reversal has cleared 4 weeks of gains. The first real support level is observed at 3600 points being the breakout level from November 2020. 

Also see last week’s comments, The last marked OPu (4 bars back) has provided ample warning as the trigger for this now much anticipated sell down.

S&P 500 DAILY
Price structure:
The daily chart of the S&P 500 contains a GAP followed by the new all time high on Friday. Last Friday notably a short range bar, and potential the exhaustion following the 5 day price rise.

 

Indicator: Relative Strength
Relative Strength short term has turned higher from the decline below 50 level, it is a measure of immediate stronger price momentum and signals and extended move may be ending as price sets a new high on weaker momentum. With the underlying price movement higher and the declining Relative Strength Indicator, traders should be on guard for weaker price in the coming weeks.

The RSI should be monitored for a movement and close below the 50 level and further move below key 30 level as a loss of upward momentum to confirm divergence.

Black and White Technical Report: The Week Beginning 08/02/2021, FP Markets

Comments from last week:  The importance of correct trend-line application can be highlighted on this Daily chart, following the rejection of the 3826 high the “tentative” line marked some weeks ago has been disregarded with last Friday’s breakdown.

(Last week’s comments have played out.) 

On further price declines daily support now remains at 3580 – 3600. The increasing range of the price bars is a sign of distribution.

USD Spot GOLD – WEEKLY
Price structure:
Gold continues to find significant resistance at the $1855.00 level, last week’s large range shows sellers in control with a close below the 1826 midpoint support level (now negated)

The key level to hold in the coming week is $1764.00, a break of this level may see a further downside extended move underway.

There is nothing bullish in this chart. However it remains highly tradeable in shorter time frames.

 

Indicator:  Relative Strength
Relative Strength turns lower and crosses the key “50” level. This is a key indicator of “slowing” price momentum, a continued move lower would only reflect negative price momentum both in the Daily and Weekly charts.

Black and White Technical Report: The Week Beginning 08/02/2021, FP Markets

Comments from last week: This is not a bullish picture with resistance remaining at $1855 and support at $1826, Gold remains trapped within a tight range and susceptible to a further breakdown to test the $1764.0 level.

Spot Gold remains with a primary down trend with the OPd of 4 weeks back remaining the dominant price bar. To create a bullish picture a weekly price close over the resistance level of $1970 is required.

Currently the price range of Gold remains highly tradable.

AUD GOLD DAILY
Price structure:
A new daily low closing price remains within the thesis the price should retest the January 2020 level at $2288.0. 

A Primary down trend remains in place without evidence of a base forming as last Thursday’s large range shows the seller in control.

This is a bearish picture for Australian producing Gold plays NCM EVN NST RRL.

Smaller Gold plays remain dependant on news flow and drilling results.

 

Indicator:  Relative Strength
With the RSI turning higher from below the key 50 level showing increasing positive momentum. 

This indicator has swung around below the 50 level since August and remains a key observation for weaker prices on slowing momentum. This momentum indicator needs a continued swing higher over the key 50 level in line with any price gains to confirm a valid buy signal.

Black and White Technical Report: The Week Beginning 08/02/2021, FP Markets

Comments from last week: The Primary down trend remains with continued rejection of higher price at the $2393.0 level.

While the underlying USD Gold price remains within a trading range, this AUDUSD price movement is dependant on the $AUD movement with a lower $AUD offering better “margins” for local producers. Until the $AUD falls or the USDXAU gold price rally significantly, local producers will remain under pressure.

The outcome is continued price weakness in Australian Gold producers.

 

SILVER DAILY
Price structure:
Last week Silver showed its true colours as the metal spiked higher on media news, and seller immediately entered the market at the August 2020 highs to set a “fake out” bar. The follow through lower set the metal back to the $26,00 level.

What should be noted here is the Daily closing price remains above this level. Further consolidation could be expected at this support level.

Silver remans highly tradeable in these volatile price movements. 

 

Indicator: Relative strength
Relative Strength has turned sharply lower but remains above the 50 level, operating in line with the underlying price movement and remains a good signal for further improvement in price momentum at this 50+ level.

Black and White Technical Report: The Week Beginning 08/02/2021, FP Markets

Comments from last week: A breakout over the $26.00 level is important and as important as rejection of the $27.70 resistance level.

Overall Silver remains within a 6 month trading range.

A daily closing price over the $27.70 resistance would signal a price rally underway.

Support will remain at $26.00 and this level should be monitored during any price weakness in the coming days.

COPPER DAILY
Price structure:  Inventories under pressure.
The Weekly chart of Copper remains VERY bullish as the current flag pattern  begins to breakout higher. A further move toward $3.80 remains the best play.

The retest low set 2 weeks ago at $3.47 offered the seller opportunity to take the price lower.

This is a very bullish chart displaying a primary UP trend.

 

Indicator: Relative Strength
Relative Strength has moved towards the 70 level (just), underlying the consolidation process underway. An early BEARISH divergence signal has so-far further developed and remains in place, this will still be monitored in the coming week. Further confirmation of a top will be shown if price moves below the $3.48 level and the RSI moves further lower below the 70 level.  

Black and White Technical Report: The Week Beginning 08/02/2021, FP Markets

Comments from last week:  Copper has entered a good consolidation range above key support at $3.47 – $3.50. These consolidation periods can last many weeks. The initial price target of $3.80 remains.

In the coming week look for further support above the $3.47 level, a close below this level would indicate profit taking with the next support level shown at $3.30 as the target on any downside movement.

 

AUSTRALIAN VOLATILITY INDEX
The XVI responding to daily news has kept the indicator above the 13 level for the early part of 2021. 

A move below the 13 level would show a decrease in forward volatility premiums (insurance PUT Option pricing)

The XVI remains elevated but seems to favour the move closer to the 13 level. 

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.   

Black and White Technical Report: The Week Beginning 08/02/2021, FP Markets

Comments from last week: Just when it was looking bullish for equities, the XVI has again moved higher on potential outcome in the US hedge fund scene. 

As the week has not ended on the high of the range, traders should monitor this indicator as the sentiment reading of the markets.

USD DOLLAR INDEX
Price structure:
The bigger picture in the DXY is of a base forming with the potential to breakout into a Primary UP trend.

In the single bar analysis rejection at 91.66 has been set with an OP (outside period) at this critical level. 

Scenario 1. A bull trap, the response is often a sharp decline.

Scenario 2. A simple back test of 90.66 would a very bullish level to hold.


Indicator: Relative Strength
While the RSI has again moved lower and back over the 50 level, the indicator remains a signal of strengthening price momentum above the key 50 level. Traders would look for an RSI move over the 70 level to suggest a more significant momentum move higher is underway, this remains highly probable.

Black and White Technical Report: The Week Beginning 08/02/2021, FP Markets

Comments from last week:  The “bullish flag” has shown a breakout higher last Wednesday to test the down trend line with some rejection. A small inverse “head and Shoulder” pattern has now developed and targets the 91.66 level on any further breakout higher.

WTI CRUDE OIL
Price structure:  This commodity is news driven by supply -demand.
From 3 weeks of consolidation to a very bullish breakout in the direction of the underlying Primary trend.

Last week’s impulsive price move has followed on from the very strong movement of 5 weeks prior. A very good move to set the tone for higher prices.

The next target remains $61.80.

The new support level remains $50.60

 

Indicator: Relative Strength
RSI turning higher over the 50 level and now over 70 remains in a very good place for further momentum price gains until a dip below this level.


As the indicator is now over 70, this should also be monitored for a potential divergence signal.

Black and White Technical Report: The Week Beginning 08/02/2021, FP Markets

Comments from last week: 3 weeks of consolidation above the $50.60 level, this remains bullish for further gains as the previous “impulsive move” remains in control of the price chart.

Traders should show caution of price failure, should the price close below the $50.60 level.

This is a potential scenario with the Relative strength remaining over the 70 level.

  • Black and White Technical Report: The Week Beginning 08/02/2021, FP Markets
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