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Black and White Technical Report: The Week Beginning 16/08/2021

Black and White Technical Report: The Week Beginning 16/08/2021, FP Markets

Continued liquidity allows the markets to grind higher. The constant failure of reversal signals may continue for weeks and months as Central Bank intervention continues.

Traders should now monitor the Nasdaq for further divergence from the Dow30 and S&P 500; we may be seeing the first crack in the current bull run.

Watch this space, Volatility remains at very low levels, as traders become complacent about forward risk.

Gold has recovered most of last Monday’s flash crash, the prior Friday’s close was down  -$42.00 leading into Monday’s opening meltdown, Silver went for the ride but has not recovered in line with Gold. The Gold and Silver charts have some significant resistance levels to trade through before becoming Bullish.

 

XJO WEEKLY    
Price structure
The Weekly primary trend continues with 7715 in sight. Last week’s range is shorter (-24) than the previous breakout week indicating a slowing of bullish interest. This Index is heavily weighted with CSL, APT and the 4 banks along with WES. However, behind the scenes the smaller equities included in the XAO have also helped push that Index to an all-time high.

 

Indicator: Relative Strength 14
RSI has turned higher, negating the potential momentum divergence signal.

The RSI should be monitored for a potential move below the key level of 70 to show a shift in price momentum. RSI can remain above the 70 level for many weeks as it does not necessarily indicate an “over-bring” signal. In this observation the RSI has danced around the 70 level for the past 5 weeks.

Black and White Technical Report: The Week Beginning 16/08/2021, FP Markets

Comments from last week:  With a strong finish at an all-time high, the Index looks set to reach the first target at 7715. Last week’s breakout is significant following 8 weeks of consolidation above the 7197 (7200) level. Any price retracement would immediately put the trader on alert for a break of the Trendline and support at 7200. The underlying Primary UP trend has resumed.

 

XJO DAILY  
Price structure
It is rare for the market to advance for 10+ days in a stretch, the development of the Bear wedge is only another way of showing the extended move that comes from a trending action, and not necessarily indicating a correction in price is coming. These types of patterns can lead to simple sideways consolidation. This market as with all markets is dependent on underlying liquidity, so far that has not changed.

Indicator:  Relative Strength 14
The Relative Strength Indicator 14 shows an increase of price momentum, most times this indicator shows the obvious, and in this case the Relative Strength would be monitored for a close below the 70 level as the first indication of a loss of underlying momentum. Given the persistent advance, this can be quite sudden.

Black and White Technical Report: The Week Beginning 16/08/2021, FP Markets

Comments from last week:  The daily chart shows the strength of the buyers, during the past week with no day trading below the low of the previous day with the market closing on the high of the week. 7450 will be the level to defend should price weakness enter this strong price movement.

 

S&P 500 WEEKLY
Price structure
Since the 1 week reversal made during late January, the Index has been persistent in the grind higher with short sharp retests of some index numbers, recently 4240. Without some form of catalyst, the market can continue to grind higher, the first signal of a potential top will be an impulsive (large range) movement lower, followed by an attempt to regain the highs in the following week – weeks. Tops take time to develop, at this point in time there is no indication of a top in place.

 

Indicator:  Relative Strength Indicator 14
Observation, the Relative Strength Indicator, first moved over the “70” level in April this year.  Currently the Relative strength Indicator has re-emerged as a developing divergence sell signal. The Sell line is shown around the 65 level. It can also be observed that the RSI can track sideways as price consolidation and trending actions take place.

Black and White Technical Report: The Week Beginning 16/08/2021, FP Markets

Comments from last week: With the 4240 level successfully defended 3 weeks ago the Index has pushed on to set an all-time high, the construction of this index is based on the industrials. The listing of some large tech stocks (AAPL, AMZN and others) having declined for the week have not influenced the overall all-time high finish. Traders would monitor the 4240 level as the continued support level to hold.

 

S&P 500 DAILY
Price structure
The small break above 4432 was tested during Thursday, making a lower low than Wednesday and regaining the high in the same trading period (OPu). This type of outside period can mark a turning point 2-3 days in advance, short term traders would monitor the 4432 level in the coming days for a close below this level as the first indication of a turning point in underlying price.

 

Indicator: Relative Strength 14
The RSI move below the 70 level would show slowing momentum, however the upturn in response to the new highs is a good indicator of continued positive momentum, a move below the 50 level would indicate a loss of price momentum and would be viewed as a signal to retest the support level at 4394.

Black and White Technical Report: The Week Beginning 16/08/2021, FP Markets

Comments from last week: The 4394 daily support level has held early in the trading week, supporting the breakout higher. With the trendline remaining tentative, traders would monitor a potential retest if the Trendline should sideways consolidation take place. For the coming week, look for a continued move higher of 50+ points.

 

NASDAQ DAILY
Price structure: This Index is the most concerning for traders
The key component for Bull market structure is the confirmation of the averages, in this case the Nasdaq has not made new highs in line with the S&P and Dow30.  For traders this may be the first signal of an impending top, this does not indicate a market correction or the first stage of a bear market. But simply offers a window to monitor other Indices’ for evidence of a turning point as confirmation. 

 

Indicator: Relative Strength 14
The Relative Strength Indicator turned higher last week after making a lower low following a week registering a reading below the 70 level. A strong BEARISH divergence signal remains in place. The clear picture is the Index must take out the recent highs with an upturn in the RSI value and remain above 50.

Black and White Technical Report: The Week Beginning 16/08/2021, FP Markets

Comments from last week:  The high last Thursday was not followed through on Friday, the short term trendline is at risk of being broken with a potential retest of 15,000 level on further weakness. During periods of price consolidation, indicators can give false signals. Price remains the key driver here to keep the Bulls engaged; the index needs to regain the 15142 level to remain bullish in the coming days.


USD Spot GOLD – DAILY     
Price structure
The sudden move in Gold on Monday morning last week was not a technical price movement but rather a liquidity event, these types of event have now consideration for support levels or trendlines. The impulsive move of two weeks ago became the hindsight precursor for lower prices (see last week’s notes), but the sudden price decline on early open on Monday could not have been foreseen.  The weekly trendline has been redrawn as tentative (2 points of contact). Friday’s impulsive move sets the stage for further gains this week, with the resistance level at $1788 the first target and potentially the first resistance level.

 

Indicator:  Relative Strength 14
The Relative Strength is heading back to the 50 level, a signal of increasing price momentum and should be monitored for a further move higher.  A movement over the key 50 level would be a very positive indicator for further price gains. 

Black and White Technical Report: The Week Beginning 16/08/2021, FP Markets

Comments from last week: Gold has failed every fundamental test, as a store of wealth, as a hedge against inflation. The price continued to trade with Wednesday’s high, retesting the upper price channel with immediate rejection. Friday’s breakdown below support is significant, as is the current retest of the WEEKLY Trendline. A breakdown of the current support level at $1764.30 may see the next level at $1725 tested.

 

SILVER DAILY    
Price structure
Three weeks ago, Silver displayed a Bullish divergence signal that resulted in a short rally to set the shooting star reversal; last week in this report the impulsive movement was noted for a potential move lower. The sudden movement on Monday morning has not followed through lower but consolidated with Friday’s close showing a pivot reversal. This may be a bullish signal for the coming week, with the low price of $22.50 as the marker signal for a resuming down trend. A bullish divergence signal has reappeared, however it should be taken in the context of the current down trend in place.

 

Indicator:  Relative Strength 14
Last week the Bullish divergence pattern failed on Monday’s sharp price movement lower. During the reversal process a new divergence signal has emerged for a potential retest of the $24.60 level.

Black and White Technical Report: The Week Beginning 16/08/2021, FP Markets

Comments from last week: Bullish divergence from 2 weeks ago resulted in a shooting star last Wednesday, also rejecting the short term down trendline.  Last week Silver extended the Daily downtrend with an impulsive ( large range ) price movement on Friday. This is an important development with the $23.75 level the next support zone with the bears in full control of price at the moment. The divergent Buy signal is now negated


AUD GOLD DAILY    

Price structure
Movement in the underlying USD gold price and the $AUD saw a retest of the 2300 level. AUDXAU is trading within a range with $2477.0 as resistance.  The current rally may find resistance at this level in the coming week.

 

Indicator:  Relative Strength 14
Relative Strength moving back below the 50 and 30 level is in line with price movements. Price momentum remains negative, only a move over the 50 level would change the outlook to positive.

Black and White Technical Report: The Week Beginning 16/08/2021, FP Markets

Comments from last week:  Significant resistance at $2477 has played out with a strong rejection last week. The bullish Cup and Handle pattern is now negated. With the underlying USD Gold price declining, the small 0.5 cent decline in the AUD has not offset the price function of the AUDUSD. Further declines would target the 2326 level.

 

COPPER DAILY   
Price structure:  LME Inventories remain historically low.
The gap open lower last Monday has provided the Buy signal for the following days. The current price move over the $4.33 midpoint level is a positive sign for further gains. Significant resistance remains at $4.50, this will be the level to clear for the buyers to take notice.  Copper remains within a consolidation trading range. A break of the $4.10 level would place Copper into a Primary down trend.

 

Indicator: Relative Strength 14
Confirmation of a loss of momentum is shown as the RSI moves below the “70” and is now testing the 50 level; a further movement below 50 signals a loss of positive momentum and would confirm a potential retest of $4.00 underway. The RSI requires a continued reading above the 50 level to signal positive price momentum. It should be remembered the RSI can track above the 50 -70 level for many months at a time and currently remains a signal of positive price momentum.

Black and White Technical Report: The Week Beginning 16/08/2021, FP Markets

Comments from last week: HGc1 Copper has rejected two significant levels during the past week, the high rejected the historical high at $4.61, it seems the recent move over this level found immediate sellers to set the a,b,c retracement. What’s important from this is the recovery in price is again finding resistance at key levels with the price closing below the $4.50 level. The fundamentals remain strong for Copper in the long term, in the short term a quick retracement back to $4.00 may be required to confirm the sellers are exhausted. In the short term, the recent level of $4.33 must hold to remain bullish.

 

AUSTRALIAN VOLATILITY INDEX
Risk moves to complacency; In the short term this remains bullish for equities. With the reading below 11 the risk is a movement higher, as markets begin showing signs of exhaustion in the coming days and weeks.

The inferred outcome is that the cost of forward insurance in the form of PUT Option premium remains in line with the underlying time decay calculations. This can change quickly. But it should be noted the weekly close is lower than the previous week.

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 forward price changes, this “skew” in pricing is measured in this XVI.

The XVI value works as an inverse observation of the underlying market.   

Black and White Technical Report: The Week Beginning 16/08/2021, FP Markets

Comments from last week:  Volatility remains subdued within the “Bullish for equities” range between 11 and 13. The XVI remains bullish for equities as risk has not been priced into forward-month PUT options. This consolidation in the XVI from April 2021, suggests a breakout is coming as the adage of low volatility leads to high volatility remains true.

 

USD DOLLAR INDEX  
Price structure
An exact double top at 93.18 with an OP marking the high, Friday’s impulsive price movement (large range) set up the potential for a retest of the 92.07 level and 91.66 level in the coming days. A positive for GOLD.

 

Indicator:  Relative Strength 14
Relative Strength has continued the bearish divergence with the movement higher to make a further lower high prior to the movement to the 50 level. 

Black and White Technical Report: The Week Beginning 16/08/2021, FP Markets

Comments from last week:  With the “further gains” observation of last week playing out, it has resulted in an impulsive price range set last Friday. With momentum strong, a retest of the 93.45 level would be expected, this will be the first real test of USD strength.

 

WTI CRUDE OIL
Price structure:  This commodity is news driven by supply -demand.
During the past week a lot of commentary centred around  the Bearish move in Oil, however the impulsive move of two weeks ago has not resulted in any meaningful follow thru. The result last week has been the fake out movement below the $66.0 level with a close into the higher part of the range. The $66.0 level remains the key level to hold in the coming week with the potential for the WTI contract to trade into the highs around $75.20.

The ultimate target remains at $100 bl.

 

Indicator: Relative Strength 14
The RSI divergence signal has followed through, crossing the “sell” level and moving below the “50” level, this is a significant signal showing loss of positive price momentum and should be monitored for 1. A cross above the 50 level, 2. A continued move lower on a break of the $66.00 level.

Black and White Technical Report: The Week Beginning 16/08/2021, FP Markets

Comments from last week: Only a price break below the $65.00 level would challenge the Primary up trend in place. Last week the contract failed to trade over the $75.20 resistance level. Also last week WTI set a lower high point, this may be the precursor for a simple a, b, c type corrective move to retest the $61.80 price level. This important level is also the breakout point of many months of consolidation prior to this current price move.

  • Black and White Technical Report: The Week Beginning 16/08/2021, FP Markets
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