Black and White Technical Report: The Week Beginning 9/11/2020

Black and White Technical Report: The Week Beginning 9/11/2020, FP Markets

This week will continue to be dominated by the US election result. A Biden – Harris win is not expected to hamper the markets progress in the coming weeks. 

Last week major indices closed within sight of all-time highs and are expected to remain on track to higher prices.
The Australian XJO closed back at a major resistance level on a strong momentum move, a good indication of an imminent breakout.

How-ever volatility measured by the XVI remains high, with potential outlier moves in both directions in individual equities and precious metals.

XJO WEEKLY
Price structure:
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 that 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 be 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. Traders should note the price structure of the past 6 weeks contains many strong range bars, a sign the market is growing restless in this consolidation. From early June to this week the XJO did not enter into a primary down trend, and this current higher low 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 9/11/2020, FP Markets
Comments from Last week:
The bullish consolidation alluded to last week has failed to follow through with the expected breakout higher. Currently the pivot point reversal is dominating the chart with the potential to retest the lower support level at 5725. Last week’s larger range is also signal for more follow through lower. See the daily chart below for more context on support and resistance.

XJO DAILY
Price structure:
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.

 

Indicator:  Relative Strength
From below the 30 level the RSI has swing sharply higher, only reflecting the strong daily ranges as a momentum move. 

 

Indicator:  VOLUME
Volumes have been robust during the past week and strong volumes again on Thursday and Friday. It has been maintained significant volume increases needed to show on the “up days” to confirm the longer-term bullish view, it can be observed last Thursday, and Friday satisfy that requirement. 

Black and White Technical Report: The Week Beginning 9/11/2020, FP Markets

Comments from last week:  The daily ranges of last Tuesday and Thursday are strong and have breached two levels of potential support at 6056 and 5960. Last Friday closing on the days low may see a sharp recovery early this week, but over-all the price structure remains weak. A recovery in price will see the broken support levels as resistance levels.

 

S&P 500 WEEKLY
Price structure:
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.

 

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 need 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 8 weeks.

Black and White Technical Report: The Week Beginning 9/11/2020, FP Markets

Comments from last week: The potential bullish flag has now failed with the weekly retest of 3230 support level. This will the critical level to hold in the coming week. This market is at risk of a full retest lower to 3028 in the coming weeks. It should also be acknowledged a break of this current 3230 support level will place the Index into a PRIMARY DOWN TREND.

 

S&P 500 DAILY
Price structure:
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.

 

Indicator: Relative Strength
Relative Strength has turned sharply higher. The turn down on Friday’s close now sets up the potential for some consolidation of price at this level.

Black and White Technical Report: The Week Beginning 9/11/2020, FP Markets

Comments from last week:  The daily chart shows a clearer consolidation pattern developing between 3580 and 3230 with last week putting in a “c” wave. The important observation here is the support level as there is no evidence of a reversal pattern in the daily bars. Last Friday’s price recovery off the low is encouraging, this support level may hold given the high of the range close and above Thursdays low. The daily chart now has a breakaway price GAP from Monday to Tuesday, that will act as a target on any price recovery.

USD Spot GOLD – WEEKLY
Price structure:

The underlying price structure remains in a Primary UP trend. The whole world still wants to be “long” Gold, until they don’t. 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. 

 

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.

Black and White Technical Report: The Week Beginning 9/11/2020, FP Markets

Comments from last week: The Gold price continues a larger consolidation pattern with the $1855 mid point providing support of the third time. Gold has the potential to retest the breakout level at $1764 in the coming weeks. A close below $1855 will be the first signal. But is should also be acknowledged the past 5 weeks have traded inside the second retest range of the $1855.0 level. A breakdown from this level would be expected to be sharp as this current consolidation area accumulates buyer on “support” looking to cover losses.

 

AUD GOLD DAILY
Price structure:
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 inline with the AUDXAU price. NST.AX continues in a Primary UP Trend. Not included in this observation are the juniors with drilling and assay programs underway.

 

Indicator:  Relative Strength
With the RSI turning higher over 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 9/11/2020, FP Markets

Comments from last week: This Daily chart really paints the picture for Australian listed producers and the underlying cost of production being a major factor in the equity price. Australian listed producers equity prices will continue to be under pressure as this price structure continues to range trade.

 

SILVER DAILY
Price structure:
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.

 

Indicator: Relative Strength
With RSI now swinging above the 50 level is confirmation of improving positive price momentum.

 

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 9/11/2020, FP Markets
Comments from last week:
 A breakdown below support at $23.40 and failure to hold the inner trend line has seen a new “tentative” trend line drawn. The daily Silver chart has no direction, however Friday’s pivot reversal offers short term traders some insight to a potential retest of $23.40 in the coming days. Fridays Pivot point is also a 3 bar type reversal, a highly reliable pattern.

COPPER DAILY
Price structure:  Inventories under pressure
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.

 

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 divergence signal may be developing, this will be monitored in the coming week. Further confirmation will be shown if price moves below last weeks low around $3.08.

Black and White Technical Report: The Week Beginning 9/11/2020, FP Markets
Comments from last week:  Last week’s observation of the RSI divergence signal is playing out to lower prices. The Pivot point reversal has pushed price back into the developing consolidation above $2.98. This historical support level will be key in the coming week/s as the short term trend line is also in confluence. The Primary Trend for Copper remain UP with $3.30 as the longer term price target. This along with consolidation in the PM sector will influence the underlying Australian producers OZL and S32.

 

AUSTRALIAN VOLATILITY INDEX
The 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. 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 9/11/2020, FP Markets
Comments from last weekA sharp rise in the volatility value shows the market pricing in future downside risk. The summary comments above point to the ongoing economic risk around COVID-19. A continued rise in this XVI chart will be a significant bearish signal for equities.

USD DOLLAR INDEX
Price structure:
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.

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 signal 2 weeks ago, is now confirming further price strength with a strong move over the 50 level.

Black and White Technical Report: The Week Beginning 9/11/2020, FP Markets
Comments from last week:  From breakdown to a “LL” 2 weeks ago, a complete reversal to stage a trend-line breakout, such is the volatility of the $USD around this US election period. Last Thursday’s strong range is an indication of price strength and could follow through to higher values. This will have strong bearish implications for the $AUD, GOLD and SILVER.

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

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 9/11/2020, FP Markets

Comments from last week: WTI has again failed at the $42.0 resistance level with a strong range to again test $35.81. Clearly WTI remains in a tight trading range over the past 22 weeks, this contraction in volatility will lead to a highly volatile breakout higher or lower, given the historic Primary down trend in place, that breakout is expected to be lower.

  • Black and White Technical Report: The Week Beginning 9/11/2020, FP Markets
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