Black and White Technical Report: The Week Beginning 16/11/2020

Black and White Technical Report: The Week Beginning 16/11/2020, FP Markets

US equities markets have set all time highs last week along with Japan making a new all time high and the Australian XJO making a strong breakout higher above a key 23 week resistance level on very good volumes.

FOMO, the fear of missing out has entered the market providing a strong boost.

This week caution is required as technical breakouts are often followed by a “retest”  of the breakout level.

Both Gold and Silver are experiencing this phenomena in the current retracements.

 

XJO WEEKLY
Price structure:
Last week the index posted a strong range bar as a follow on from the impulsive reversal two weeks ago. Historical resistance levels  seem to be having a strong influence with the close last week at the 6430 support/resistance level. Last week’s move is a breakaway Primary movement from the 23 week consolidation area.

From early June to this week the XJO did not enter into a primary down trend, and this current higher low and new high may be looked back on as the first signal of the continuing uptrend.

 

Indicator: Relative Strength
The RSI indicates has turned sharply higher in line with last week’s large engulfing range. A very good signal of improving price momentum.

Indicator: MACD
MACD remains a swing “Sell” signal again this week and has continued in developing a sideways movement, only reflecting the slowing momentum. The completed full cross over becomes the Sell signal. It should be acknowledged this indicator is 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 16/11/2020, FP Markets

Comments from last week: Two weeks ago a full pivot reversal from resistance, this week a complete engulfing range to close back onto the key 6200 range. The most important observation is this Index has now set a “higher low” (HL) without a full retest of the lower 5725 level. The expectation is for a follow on and breakout higher, with 6430 the next resistance level.

The current 23 weeks of consolidation may about to come to an end. The adage of low volatility leads to high volatility should be on every trader’s mind in their application to the markets.

XJO DAILY
Price structure:
Commentary around the potential distribution top can now be dis-guarded as the current breakout is a decisive move by the Bulls.
Last Thursday and Friday have resolved into a developing Bullish flag, further weakness has the potential to “retest” the 6200 breakout.
The short term trend support line is now in place, future price action may test support along this line.
 

Indicator:  Relative Strength
Relative Strength has moved over the “70” level, this is not an over brought signal. The current level is a reflection of a strong momentum move underway.
Late last week the indictor “rolled” lower and will be monitored for a divergence signal.
This would require the market to make a new high while the RSI line makes a lower high.  

 

Indicator:  VOLUME
Volumes have been robust during the past week however the declining volume pattern over the 5 days indicates a lack of commitment by the buyers,
Look for further rising volume days on a continuation of the current move higher.

Black and White Technical Report: The Week Beginning 16/11/2020, FP Markets

Comments from last week:  Last Monday / Tuesday set the pivot point reversal with only one day of consolidation at 6056 before the continued move higher. The higher low is now clearly defined in this daily chart as a precursor to a potential breakout higher to test 6430.

S&P 500 WEEKLY
Price structure:
The S&P 500 has posted a spinning top bar a signal of indecision. Current market breadth, a measure of advancing equities again declining indices remains a bearish at 30% ish for the recent period along with only 60% of listing making YoY highs.
This indecision may see some selling enter the market as a form of retest of the breakout, consolidation above 3400 would be a good sign the Bull market signal remains in place.

 

Indicator:  Relative Strength Indicator
Relative Strength turning sharply higher above the key 50 level is a good signal of changing price momentum, a move below 50 would have signalled very week momentum.
The upturn now needs to continue to move towards the 70 level as a signal of strong momentum.
With the current swing higher it should be acknowledged the RSI has remained above the 50 level for the past 5 months.

Black and White Technical Report: The Week Beginning 16/11/2020, FP Markets

Comments from last week: The S&P has avoided the Primary down trend signal with a strong pivot point reversal. This large range week has the potential to follow through into new highs. As the market is again within sight of all time highs, a breakout could be expected to “retest back” onto the breakout level of 3585. This will be an important confirmation process for the buyers in this continuing Primary UP trend.

S&P 500 DAILY
Price structure:
The daily chart is one of developing consolidation, several “gaps” remain below  the WEEKLY support level of 3400, this can be problematic should selling enter the market a potential move into 3100 would be needed to close the gaps.

With Fridays high close a retest of Monday’s high is the preferred outcome.

Price movement around the 3580 level will be the critical level to watch in the short term.

 

Indicator: Relative Strength
Relative Strength has sideways movement. The turn down from Friday’s close two weeks ago now sets up the potential for some further consolidation of price at this level.

Black and White Technical Report: The Week Beginning 16/11/2020, FP Markets

Comments from last week:  The volatile past 5 days has left two GAPS open, historically the S&P fills Gaps on retracements. (A major unfilled Gap remains from May 2020 under 2900.) The 3 bar reversal has set the higher low point at (c). 

The level of 3580 remains resistance for any further advancement.

Should the Index retrace with profit taking or further uncertainty around the US election look for support in the GAP area as confirmation of strength or weakness if the gap fails to hold price support.

USD Spot GOLD – WEEKLY
Price structure:
Last week Gold failed to close over the $1970 level negating any further bullish signal.

I have marked the potential a,b,c movement developing. Last weeks outside (OPd) range is a bearish signal and will be difficult to over come in the short term.
Gold remains inside this consolidation, a break of $1855 support would send a sell signal with the further potential to retest the longer term trendline.

The primary trend remains UP, with a close below $1855.00 this would put Gold into a Primary down trend.

 

Indicator:  Relative Strength
Relative Strength turns higher and importantly remains above the “50” level.
While below 70 and above 50 there is not much to read into the indicator until a move over 70 occurs.
The overall declining of the RSI over the past 8 weeks is a bearish signal.

Black and White Technical Report: The Week Beginning 16/11/2020, FP Markets

Comments from last week: Last week I wrote about the expectation of Gold breaking lower below $1855 support. Last week Gold put in a strong range to complete a pivot point reversal with a close over $1939.65. 

This is a very important development in the current price structure.

Resistance at $1970.0 remains as does the $2075.0 high. With a strong range bar in place the expectation is for a continued rally to retest the high, only a close over the $1970.0 would confirm the potential for a higher retest.

AUD GOLD DAILY
Price structure:
The significant move lower in AUD Gold has broken a key support level at $2610 with the following trading days only moving higher to retest the breakdown level. 

This level will be difficult to overcome as the move lower has been quite decisive. Last Fridays indecisive bar has the potential to mark a short term turning point.

 

Indicator:  Relative Strength
With the RSI turning sharply lower below the key 50 level. This indicator has swung around the 50 level since August and Traders should monitor this indicator for a continued swing higher in line with any price gains to confirm a valid buy signal.

Black and White Technical Report: The Week Beginning 16/11/2020, FP Markets

Comments from last week: The important observation of the price structure of the past 3 months is simple consolidation. The producing Gold majors remain highly volatile and remain in major consolidation phases in line with the AUDXAU price.

 

SILVER DAILY
Price structure:
The Daily chart of Silver is developing a bearish flag pattern ( 4 days) following the sharp decline last Monday. Silver continues with a large Secondary market movement. A further retest of the tentative trend line may confirm support along this line, a breakdown lower would be a bearish signal for further declines. Silver is approaching the decision point within a very large “pennant”, these area’s of low volatility can lead to highly volatile breakouts.

 

Indicator: Relative Strength
With RSI now moving along the 50 level as this consolidation develops.

Indicator: MACD
The MACD has provided a swing Sell signal and should be monitored as a sell signal. With the MACD now moving sideways this should be monitored for a confirmation buy signal.

Black and White Technical Report: The Week Beginning 16/11/2020, FP Markets

Comments from last week:  Daily resistance at $26.18 need to be overcome to see XAG move into a breakout. The 3 bar reversal discussed last week followed by Thursdays large range day sets up a further momentum price move.

Look for a retest of $26.18 as a support level should price break above this level.

The price structure of Silver has a lot of work to do before the chart could be described as bullish.

COPPER DAILY
Price structure:  Inventories under pressure
Last week Copper provided a 2nd retest of the $3.20 level, the high close in the range of the weekly bar, suggests a breakout to higher prices and a retest of $3.30.
The developing rising wedge pattern can breakout lower on rejection of higher prices. See RSI note.

 

Indicator: Relative Strength
Relative Strength has moved strongly over the 50 level and 70 level this is now moving back below the 70 level as price moves higher. An early BEARISH divergence signal in now in play, this will be monitored in the coming week. Further confirmation will be shown if price moves below last weeks low around $3.10.

Black and White Technical Report: The Week Beginning 16/11/2020, FP Markets
Comments from last week: A volatile 3 weeks for Copper as the reversal of 2 weeks ago has failed to follow thru with any meaning full retest of lower prices.

Last week’s strong range plus high close completes the Bullish reversal, and sets up a retest of the $3.20 high.

Copper inventories remain low at the LME, this will be supportive of price in the coming months.

 

AUSTRALIAN VOLATILITY INDEX
The GAP open lower and the midweek spike low below 15 has been a Bullish signal for equities.
However the XVI value still remains elevated at 19.89, only indicating forward pricing of Equity Options as protection remains high.  

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 16/11/2020, FP Markets

Comments from last weekThe volatility index has its own volatility! The outside range with the low close is a less bearish signal for equities. The overall reading remains somewhat high and will be reactive to daily news.

USD DOLLAR INDEX
Price structure:
With the lower low now set, the underlying Down trend remains in place with current daily resistance shown at 93.00.
Although the USD remains within a trading range from 92.1 to 94.65 the overwhelming weight of price action remains along the support level.
A break of this level may bring in price volatility as the next lower level of support is found.


Indicator:  Relative Strength
A complete breakdown of the Relative Strength to move below the “50” level, the current swing lower is a significant implication for price. What was a bearish outside period (OPu) followed by the impulsive signal , the RSI is now confirming further price weakness as the indicator turns lower. 

Black and White Technical Report: The Week Beginning 16/11/2020, FP Markets

Comments from last week:  Trend-line breakout to trend-line failure. The OPu from Wednesday is now a high probability marker of the high point and will take a significant price move to overcome.

The PRIMARY trend remains down, with the now important support level at 92.10 again being tested. Thursday’s impulsive price move is Bearish and price should continue to follow through lower.

WTI  CRUDE OIL
Price structure: This commodity is news driven by supply -demand.

Indicator: Relative Strength
RSI turning higher but remaining under 50 is not a great signal for the bullish. Still confused? So is the market.

Black and White Technical Report: The Week Beginning 16/11/2020, FP Markets

Comments from last week : Resistance at $42.00 with support at $35.81 again tested. WTI can only be described as being trapped within a narrow price range.  (23 weeks!)

Last week’s bar with a shadow at the lows and highs indicates neither the Buyers or sellers have control of the price. Further consolidation is expected.

  • Black and White Technical Report: The Week Beginning 16/11/2020, FP Markets
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