Black and White Technical Report: The Week Beginning 24/05/2021

Black and White Technical Report: The Week Beginning 24/05/2021, FP Markets

From a very weak start last week to a strong finish. The underlying Primary Up trends persist and should be regarded in the context of a strong market based on underlying economic numbers and liquidity. It is concerning the “liquidity” part of the equation is now being discussed amongst central bankers. Traders could monitor support levels currently being held, not social media for overall market direction. 

An earlier concern of the current volatility in the Crypto market flowing through into equities has not surfaced but has served as a reminder of how fast markets can retrace when pricing confidence is lost.

Gold and Silver remain very bullish, as support levels move higher. Of note is the Australian dollar Gold price moving over the $2400.0 level underpinning support of local miner’s equity price. Gold in very major currency denomination has now displayed a breakout from the recent down trend.

 

XJO WEEKLY
Price structure:
The developing consolidation between resistance of 7130 and 6900 support shows as “midpoint” support from the strong range impulsive bar of early April.

This remains a positive pattern for further gains. With support and resistance in place a breakout of the high 7130 may see a retest of the all-time high.

As the Index calculation is “weighted by market cap” the Index value is stating equities in the top 20 remain well supported.

With a breakdown below key support of 6900, the earlier support level of 6737 awaits. 

 

Indicator: Relative Strength
The RSI indicator has remained over the key 50 level, last week turned sideways, this is a signal of slowing price momentum, however the reading remains above the 50 level indicating price momentum remains positive.

The RSI should be monitored for a potential move below the key level of 50 to show a shift to bearish momentum.

Black and White Technical Report: The Week Beginning 24/05/2021, FP Markets

Comments from last week: Last week’s Outside range down close (OPd) has again set resistance at the 7130 level. The OP is a very strong marker for turning points following a rise in price. However it is not the signal for a bear market move, although the #3 candle of 4 weeks prior is playing out. The underlying Primary trend for the XJO remains UP with a secondary consolidation period underway.

Further price weakness may see the 6737 support level tested, this will a key hold level in any further consolidation decline.

 

XJO DAILY
Price structure:
The daily chart may have completed the a,b,c pattern reversal. The last 3 bars now showing as the “3-bar reversal” pattern. This chart is really highlighting the overall confusion in the market direction, with a long consolidation periods in 2020, and now again in the first months of 2021. The chart also displays the 5-period simple moving average, with price moving higher over the average, and the average itself turning sideways as price completes the small reversal pattern.

The 7090 is the first resistance for higher prices, a retest of the “pipe reversal” high is not out of the question in the coming days. 

 

Indicator:  Relative Strength
The reading does show Relative Strength moving lower below the 50 level with price weakness, the 50 level is the key level to hold for the market to make further gains. This should now be monitored for a crossover of the 50 level with further gains in the Index.

 

Indicator:  VOLUME
Overall volume has been increasing as price declines, Last Wednesday’s volume was high on the down close for the day. Further price gains would again need strong volumes to confirm broad market participation.

Black and White Technical Report: The Week Beginning 24/05/2021, FP Markets
Comments from last week:
 Last Monday – Tuesday displays a classic “pipe reversal” as price immediately rejects and moves back into the recent consolidation zone above 7000 points. Fridays close above this 7000-point key level is a signal of short term support. In the coming week this will be the level to hold, a closing price below this level may see further declines back to Daily support of 6837.0 as a retest of the early April breakout.

S&P 500 WEEKLY
Price structure:
The #3 marked bar may have played out with last week’s lows reversing from 4046 intimate support with a second Weekly “hammer bar” displayed. The sellers have now had an opportunity to move the markets lower but failed. The SPX may consolidate further along these levels, prior to a breakout higher.

The last 2 weeks of trading the bars have displayed long lower shadows a signal of buyer support at lower prices.

While the short term trendline has been broken important support levels of 3980 and 3725 remain in place.

 

Indicator:  Relative Strength Indicator
The RSI observation remains the key signal and is currently reflecting weaker price momentum as the indicator moves below the 70 level. With the reading moving sideways, this is not a level of over brought, and only indicates very strong momentum, and can last for many weeks.  (This type of momentum is often a precursor to profit taking.)

Should the RSI show a movement below the 50 level, this would be a strong bearish signal.

It should be acknowledged the RSI has also remained above the 50 level for the past 12 months.

Black and White Technical Report: The Week Beginning 24/05/2021, FP Markets

Comments from last week: The bearish signal #3 may have played out, last weeks lower shadow below the 4114.0 level with a close above this level is a short-term bullish signal. Tech stocks (also listed in the S&P) have regained some losses taken over the past 2 weeks. The underlying Primary Trend remains UP, but price consolidation is underway with last weeks range covering the previous 5 weeks of price action.

Traders would look for a further close below the 4114.0 level as an early signal of a potential “top” in place.

S&P 500 DAILY
Price structure:
The a, b, c pattern has not quite played out, although price “GAP” has been resolved, leaving the lower GAP at 4035 in play from Friday’s Fake out (FO). The Weekly chart suggest further consolidation, this Daily chart displays that consolidation between support of 4035 and 4238 resistance.

 

Indicator: Relative Strength
Relative Strength short term has turned higher above the 50 level. It is a good indication to see the higher low made above the 30 level during the week, momentum is again shifting to an upward bias. The indicator should be monitored for continued readings above the “50” level. 

Black and White Technical Report: The Week Beginning 24/05/2021, FP Markets

Comments from last week:  The long term trendline is now broken and may be in the process of being back tested. From Monday’s pivot reversal the “GAP” shown from Tuesday open is being “filled”, the Daily chart shows a further price gap below this current level. Without follow through from Wednesday’s decline the Thursday IP (inside period) has shown the market in balance.

Trader should be aware the high price needs to be taken out in the next few days OR this may be the beginning of an a, b, c type of decline, in this case the price GAP at 4035 would be the first target.

USD Spot GOLD – DAILY
Price structure:
The daily chart of Gold shows a major break through of the historical support resistance level of $1863.66. The OPu on Wednesday may have marked the high for the short term and will be the high ($1889.75) level to resolve in the coming days.

$1966.80 beckons within this Primary UP trend.

 

Indicator: Relative Strength
Relative Strength turns sharply higher and moved above the key “70” level in line with the current breakout of the trading range. As the indicator has made a new high in line with the price action, the underlying structure could now be monitored for a “divergence” signal where the RSI moves lower but price moves higher.

Black and White Technical Report: The Week Beginning 24/05/2021, FP Markets
Comments from last week:
Gold remains in a Primary UP trend.This remains a very bullish chart with a new pivot point completed on Friday’s close. $1863.66 remains the key level to cross in the coming days.

The other important observation is Friday’s expanding price range. The general observation of the past 2 months is the strong price range bars are to the up side in contrast to the January – March period of declines.

SILVER DAILY
Price structure:
Last Tuesday’s Fake out high (FO) has set a small reversal to test the short term trendline.

Silver price movements lack any real impulse movement higher. A potential retest lower, back to $26.00 is probable as momentum is lacking with an RSI divergence “sell” signal in place.

Indicator: Relative Strength
A poor indication of price strength is showing in the Relative strength Indicator (14) as the reading has moved over the 50 level and again moved over the 70 level for 2nd time, but rolled lower, an RSI Bearish divergence signal is in place. A further bearish signal will be displayed with RSI moving below the 50 level.

Black and White Technical Report: The Week Beginning 24/05/2021, FP Markets

Comments from last week: The daily chart shows Silver in a game of “inches” with $26.0 the key resistance turning to support for many weeks and now the $27.0 – 27.70 area becoming the key levels to monitor.

Silver remains very bullish with the next target resistance shown at $28.40 following last Friday’s continuation pivot point.

The Primary trend is now confirmed as UP.

 

AUD GOLD DAILY
Price structure:
This type of trendline breakout pattern has occurred with Gold in every major currency. EUR-XAU, Yuan-XAU, JPY-XAU. The price level of $2541.0 remains the target, but after several weeks of gains a retracement would be probable as the RSI rolls lower.

The outcome would show as consolidation in price of Australian producers. NCM, NST and SLR.

The smaller Australian speculative explorer stocks will remain news dependant.

 

Indicator:  Relative Strength
This momentum indicator has continued a wider swing higher over the key 50 and 70 level in line with price gains to reconfirm a valid RSI buy signal. BUT the RSI is rolling sideways as price puts in a new high, momentum is slowing. 

Black and White Technical Report: The Week Beginning 24/05/2021, FP Markets

Comments from last week: Gold in AUD terms has crossed a significant price barrier as the final down trend line is breached. Following the consistent rally, some consolidation would be a good outcome in the coming days. This will depend on the $AUD remaining stable to lower and the underlying USD Gold price continuing to rally. The Australian Gold producers stock prices are very price sensitive around this chart, this may be the catalyst for further investigation into the induvial stocks.

NCM, NST, SBM, RRL, SVL, RSG, YRL.

COPPER DAILY
Price structure:  Inventories remain historically low.
The most important observation in the Daily Copper chart is the closing price below the $4.61 level constituting a short term sell signal.

With the close on Friday setting a reversal pivot point the lower Gap at $4.36 remains the price target in this well-defined UP trend. 

Copper remains a Bullish fundamental play based around lack of new production and low inventories.

Indicator: Relative Strength
Relative Strength has moved above the 70 level and higher than the earlier reading, this constitutes a failure in the potential Bearish divergence signal. 

Confirmation of a loss of momentum will be shown when the RSI moves below the “70” level and below the internal low set during February. The highlighted level in red.

It should be remembered the RSI can track above the 50 -70 level for many weeks at a time and currently remains a signal of very strong price momentum.

Black and White Technical Report: The Week Beginning 24/05/2021, FP Markets

Comments from last week: Potentially a reversal signal showing in Copper, but the strong observation is price remaining above the $4.61 level. Following the recent strong rally, some consolidation above the $4.60-$4.61 level would be an ideal outcome.

 

AUSTRALIAN VOLATILITY INDEX
Forward risk has reduced with the XVI reading falling back into the bullish zone. Going forward the outlook is for equity gains as primary trends resume.

Overall, in the chart looking back to MAY 2020 the volatility levels have steadily declined, a good outcome for a forward steady market.

The XVI is the difference of 1-3 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 24/05/2021, FP Markets
Comments from last week: The fear gauge has turned higher with the markets considering the prospect of increasing real inflation being a weight on equities. (this may turn out to be a false outcome)

The underlying markets remain somewhat Bullish. The expectation would be for a decline in the XVI reading in the coming week.

But traders must be aware the forward pricing of risk is increasing.

USD DOLLAR INDEX
Price structure:
Last week’s lows at 89.64 now a key support level for the coming week, a price break below this level would reconfirm the Primary Down trend of the DXY.

The current price channel developing the lower support of 89.19 is the short-term target.

Further pricing pressure on Commodities may be the outcome.

 

Indicator:  Relative Strength
While the RSI has continued to track sideways, while below the 50 level, this will be monitored for a cross of the “30” level as confirmation of downward price momentum increasing. 

Black and White Technical Report: The Week Beginning 24/05/2021, FP Markets

Comments from last week:  Technical rejection of 90.85 is the key development in the past week. A movement below 90 and further declines may help precious metals hole recent gains.  (The underlying AUDXAU chart (above) may find some selling pressure on any further USD decline offsetting some recent gains.)

WTI CRUDE OIL
Price structure:  This commodity is news driven by supply -demand.
Another Outside period (OP) within the range of $61.80 and resistance of 66.00. The trading range resistance level has been in play for many years. Currently there are no chart signals to say this may trade higher in the short term.

The OP is a marker for a market high and will need to be resolved with a price breakout either way from this consolidation area.

 

Indicator: Relative Strength
RSI turning lower while above the 50 only indicates slowing price momentum in the current price consolidation phase. 

Black and White Technical Report: The Week Beginning 24/05/2021, FP Markets
Comments from last weekFrom last weeks comments the price consolidation between $66.00 and $61.80 remains. The $61.80 level remains the critical level to hold for the Weekly closing price.

Although these ranges are highly tradeable, WTI needs a breakout to confirm further direction. 

The $75.20 remains the preferred target as the underlying Primary UP trend remains in place.

  • Black and White Technical Report: The Week Beginning 24/05/2021, FP Markets
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