Black and White Technical Report: The Week Beginning 18/10/2021

Black and White Technical Report: The Week Beginning 18/10/2021, FP Markets

What started off as an indecisive week, the strong finish last week sets up the markets for further gains in the coming weeks.

Higher Inflation readings failed to slow the advance of the markets.

The US reporting season is off to a strong start, reflecting solid gains in the Nasdaq and S&P 500.

Copper made a standout move last week and closed on the high, again at 2-year price highs.


Gold Bulls were again trampled in the selling last week, the precious metals sector is starting to show signs of price volatility, which is great for traders.

 

Historically October is a bullish month and there is no evidence to suggest otherwise for this October.


The China Evergrande debt saga is not over, and further news may adversely move the markets, in particular the threat of contagion to other credit providers in the real estate sector. 

 

XJO WEEKLY    
Price structure:
The weekly close over the IPu from 2 weeks ago is a good outcome for the buyers. The chart now confirms the 7200 area as support; this should be monitored on any price retracement in the coming week. While the Index stock remains mixed, the financials have held up giving underlying support to the index in general. Australian companies are conducting AGMs this can bring some individual volatility, but overall, the Index looks to be heading to the next resistance level at 7530. The market needs to put in a new high in the coming weeks; the advent of a lower high being set could signal the beginnings of a bearish phase. The underlying primary trend remains UP.

Indicator: Relative Strength 14
Relative Strength has remained positive, as the reading is above the 50 level (just) the next move in the RSI will be telling for overall market strength or weakness.
The RSI should be monitored for a continued move above the key level of 50 to show a continuing shift to bullish price momentum.

Black and White Technical Report: The Week Beginning 18/10/2021, FP Markets

Comments from last week:  An inside range (Ipu) puts the market in balance. What’s to notice is, the historical level around 7197 has provided price support. The conclusion is the market is providing good technical support at this 10% retracement from the high level. In the coming week the closing price on either side of the Ipu will give some insight into further gains (or losses) in this market, following the completion of the a,b,c retracement. Stock should be analysed individually, the better performers last week remained in the Energy and Financials space.

The underlying primary trend remains UP.

 

XJO DAILY  
Price structure:
The Daily view offers a different picture in the short term; the current resistance level of 7370 is being challenged; a bullish outcome would be for a Daily close over this level in the coming days. Of concern is the general chart structure without any impulsive UP days; the price structure from early October may be forming a bearish flag pattern; a close below 7216 would signal a new leg down. The bigger picture risk is the Index fails to take out the higher resistance levels of 7530 and 7632, if this longer-term (many months) scenario plays out the whole price picture from June 2021 onward may be a very broad topping pattern.

 

Indicator:  Relative Strength 14
Divergence can be seen with the RSI setting higher lows against the underlying price making new closing lows last Tuesday / Wednesday. Daily price momentum is still regarded as negative; however, the overall declines are becoming weaker as the RSI moves toward the key 50 level.


Indicator:  VOLUME

Trading volumes are generally declining on a rising price structure, this is not a great signal for the Bullish.

Black and White Technical Report: The Week Beginning 18/10/2021, FP Markets

Comments from last week:  The past week has seen the market churn out a low-price area, the giveaway is in the Relative Strength Indicator 14 (see below). Last Thursday’s IP followed by Friday’s breakout gave an indication of a test of 7370 underway.  Friday’s high close should lead to a positive opening for this week. The bigger picture risk is the Index fails to take out the higher resistance levels of 7530 and 7632, if this longer-term (many months) scenario plays out the whole price picture from June 2021 onward may be a very broad topping pattern.

 

S&P 500 WEEKLY
Price structure:
A strong pivot point from the 4320-support level is a good signal for the continuation of the UP trend. Strong gains in technology stock continue to underpin the markets. However, failure of the Index to set a new high in the coming weeks would be a bearish signal, traders should be aware a breakdown of the 4240 level would put the index into a down trend. At this point in the chart the strong range of last week suggests continuation higher.

The underlying Primary trend is UP.

Indicator:  Relative Strength Indicator 14
A signal of increasing momentum as the Relative Strength Indicator (14) turns higher on the large range movement of last week.

Black and White Technical Report: The Week Beginning 18/10/2021, FP Markets

Comments from last week: Support is building above 4240 and 4320 with the market finding buyers in this area. Last week’s bar showed some indecision with a closing price well off the high. The underlying Primary trend for the S&P 500 is UP and there is no evidence of a reversal top in place. The price movement outside of the longer-term rising wedge has not met with any committed selling as the Weekly price ranges high to low remain in sync with past ranges. Further consolidation may take place in the coming week. A weekly close below 4320 could be the warning for weaker prices in the coming weeks, but at this juncture the market remains bullish.

 

S&P 500 DAILY
Price structure:
The S&P has a new “tentative” trendline in place as the reversal set a pivot point Wednesday – Thursday last week. The index is leaving several open Gaps, these areas will be monitored for support on any price retracement in the coming days. With the 4444 level now cleared, the all-time high of 4536 remains the first target in this Primary Bull market move. The common picture across all markets (indices) is the potential broadening top pattern beginning from June 2021.

Currently the primary trend remains UP.

 

Indicator: Relative Strength 14
The Relative Strength Indicator (14) has turned higher over the 50 level, a signal of underlying positive price momentum. A close below the 50 level would alert traders to failing upward price momentum.

Black and White Technical Report: The Week Beginning 18/10/2021, FP Markets

Comments from last week: With the late week rises of price the a,b,c retracement pattern looks to be complete. The Gap open on Thursday is concerning as this often leads to some selling as quick profits are realised. The longer term trendline is the resistance point into the close of last week as is the higher 4444 level of past resistance.

 

NASDAQ DAILY
Price structure:
As with the S&P the Nasdaq is gapping higher, given the chart structure of the past 2 months the risk is the current move could be the euphoric exhaustion move common at the top of extended bull markets. Further evidence of this type of activity would be another Gap higher combined with extended daily price ranges. The growing concern is the formation of a major top pattern that may take months to confirm.

The underlying Primary trend is UP.


Indicator: Relative Strength 14
Relative Strength Indicator moving over the 50 level is a strong sign of improving price momentum. 

Black and White Technical Report: The Week Beginning 18/10/2021, FP Markets
Comments from last week
: As with the S&P the a,b,c retracement pattern is deemed complete with the price moving higher following last Monday’s swing low point. In the short-term, last Friday has set a bearish pivot reversal point off the extended trendline for a potential retest of 14535 support. The Nasdaq may be building support over the 14535 level, and as with the other Indices’ this may be viewed as a major top pattern building from the early July period to now.

 

USD Spot GOLD – DAILY     
Price structure: No evidence of a Bull market.
Price rejection of the $1788 area with a strong impulsive price move suggests all is not well in the buyer camp for Gold. Friday has set a reversal pivot point from resistance but stopped short of breaking the $1764 support level. With prices following through lower this week, a close back over $1764.30 would be a bullish signal. The key observation in this chart is the Higher low (HL) set during the last week of September has not been broken to the downside, but the current lower high may change that as potentially the Weekly trendline is again tested.


Indicator:  Relative Strength 14
The Relative Strength moving below the 50 level is heading back to the 50 level, a signal of increasing price momentum with the sharp move higher and should again be monitored for a further move higher above the 50 level. The fact that it has failed is concerning for the bulls. 

Black and White Technical Report: The Week Beginning 18/10/2021, FP Markets

Comments from last week:  There is NO Bull market in Gold. The failure of the metal to follow through higher from the impulsive range is concerning as the $1764.30 level remains as the major resistance level to cover. Last Friday’s Fake out (FO) is also a shooting star candle and has the potential to retest the $1725.0 level and the long term Weekly trendline in the coming days.

 

SILVER DAILY
Price structure:
Silver has moved outside of the down trend line from the June 2021 highs. Last Friday’s low retested the trendline and saw silver trade higher off the low into the close.  (A very different picture to the Gold price.) The underlying Primary price trend for Silver is down, the move into the close of last week could be a strong signal for overall trend reversal, $25.52 remains the first resistance level to test.


Indicator:  Relative Strength 14
Current Relative Strength is now viewed as potentially bullish, as the reading moves over the 50 level.

Black and White Technical Report: The Week Beginning 18/10/2021, FP Markets

Comments from last week: As with Gold, Silver has failed to follow through higher last week, essentially trading sideways from the swing point low at $21.60. Silver remains in a Primary downtrend and there is no evidence of a base being formed as the launch place for an UP trend to take hold. Last Friday set a shooting star candle/bar under the downtrend line, $22.50 needs to hold in the coming week, a close below this level would give a strong bear continuation signal.

 

AUD GOLD DAILY    
Price structure:
Weaker Gold price and Stronger $AUD put the XAUAUD price significantly lower last Friday. Last week’s comments had the XAUAUD set to move higher. Further consolidation looks to be on the offering between $2300 and resistance of $2477.0

The Australian Gold producers may see some selling this week.

Indicator:  Relative Strength 14
Relative Strength moving back below the 50 level is in line with price movements. Price momentum has again turned flat to negative, a further rise in price will see the RSI move over the important 50 level.

Black and White Technical Report: The Week Beginning 18/10/2021, FP Markets

Comments from last week: More consolidation with the current daily bars building a bullish flag, the AUDXAU remains within a large trading range from 2326.00 to 2477.0. Traders of Australian Gold equities would look for a solid close over the $2477.0 level as a very strong signal for further gains.

 

COPPER DAILY   
Price structure:
The strongest of the commodity moves last week. Copper also set the strongest price range bar in many years. However, the Weekly gap open over $4.33 is of concern, this might be a euphoric move and may see profit taking in the first days of this week. If any retracement takes place $4.33 remains as the key support level.

Australian producers OZL, MIN, BHP, will benefit in the coming week.

Indicator: Relative Strength 14
The sharp turn higher in the RSI, a reflection of the sharp price movement, is a good signal for further momentum gains. The key for now is the RSI remains above the 50 level as a reflection of ongoing and positive underlying price momentum.

Black and White Technical Report: The Week Beginning 18/10/2021, FP Markets

Comments from last week: The support level at $4.00 has held price for the past 3 months, currently the resistance level remains at the Midpoint range of $4.33. The a, b, c retracement pattern is complete, the low at “c” and the $4.00 support will remain the level to hold in any further price weakness. The lower shadows of each week indicate support at lower levels.

A daily close over the $4.33 level should be monitored for further gains.

 

AUSTRALIAN VOLATILITY INDEX
Early last week the XVI moved higher as equities moved lower. The decline in the XVI reading back into the Bullish zone is a good indicator for the market to remain on a positive note this 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 18/10/2021, FP Markets
Comments from last week:
Volatility has settled lower following the news of the Chinese Evergrande potential default. The end reading remains elevated and will bring some pressure onto equities.

USD DOLLAR INDEX  
Price structure:
Following strong gains early last week, the now confirmed “divergence” signal shows the new high being made on lower price momentum. This bearish signal may have indicated the top is in for the DXY, with the outcome showing as a stronger $AUD among others. Traders would monitor this chart for a bullish reversal signal in the coming days. The underlying Primary Trend of the DXY is UP, in this current retracement the 93.45 level must hold to keep the chart technically strong.

Indicator:  Relative Strength 14
The Relative Strength has turned down as the price made a new high. This type of divergence signal is highly reliable.

Black and White Technical Report: The Week Beginning 18/10/2021, FP Markets

Comments from last week: The push higher continues with last week’s breakout form the Bullish flag pattern. The breakout has not immediately followed thru higher and further consolidation may occur. The underlying Primary trend is UP.

US 10 year yields have also climbed higher to finish at 1.61%.

 

WTI CRUDE OIL
Price structure: This commodity is news driven by supply -demand.
Historically, the WTI contract can put in extended price moves lasting many weeks.

This current movement has the hallmarks of an extended price move (higher).

$75.20 is now the key support level on any price retracement in the coming week/s.

The current trendline remains in place as further price support at around the $75.20 area on any price retracement.

Oil $100.

 

Indicator: Relative Strength 14
RSI has set a sharp reversal to move over the 50 level and now the 70 level, look for a further rise in this indicator as the current reading move over the 70 level is confirmation of the underlying Bullish momentum in the price action.

Black and White Technical Report: The Week Beginning 18/10/2021, FP Markets

Comments from last week: Last finished with a large range bar with a high range of $81.11. The solid close above the $75.20 is an important event for the Bulls. There are no further significant resistance points until the $100 level.

  • Black and White Technical Report: The Week Beginning 18/10/2021, FP Markets
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