Black and White Technical Report: The Week Beginning 2/08/2021

Black and White Technical Report: The Week Beginning 2/08/2021, FP Markets

US earnings season is over, company earnings hit a 10 year high, and the calls for a market top persist.

From a technical perspective there are some early divergence signals, these only signal caution and can precede the market’s bullish exhaustion.

Exhaustion signals can precede simple price consolidation in the form of a trading range.

The key as always is the weekly price chart, this is where Primary trends are acknowledged for beginning and ending. Weekly reversal patterns often take many weeks to form. At the moment the Technicals do not show a top.

In the short term traders should be aware of a Gap down day as the first warning of something bigger in play.

XJO WEEKLY   
Price structure:
The 7406 point high of 7 weeks ago was briefly exceeded last week with the close last week at 7392 being inside this previous high, this constitutes a “fake out” move. The sellers are waiting above the 7406 level. The Fake out move often precedes some form of price consolidation as buyers and sellers regroup. The support level of 7197 (7200) remains strong with 9 weeks of trading above this key level.

 

Indicator: Relative Strength 14
The RSI indicator has turned sideways and moved below the 70 level. A continued reading under the 70 level would put traders on alert for some form of slowing divergence signal. During time of consolidation the RSI will normally decline as price moves sideways. The RSI should be monitored for a potential move below the key level of 50 to show a shift in price momentum.

Black and White Technical Report: The Week Beginning 2/08/2021, FP Markets
Comments from last week:  The Weekly bar displays a record close prior to first testing the lows, the current weekly outside range (OPu) is often a marker of major turning points, within 1- 3 periods (weeks). This week look for a continued move higher towards the price target. Underlying support remains at 7197. The current consolidation area looks to be complete with the Primary UP Trend set to resume.

 

XJO DAILY  
Price structure:
Last Tuesday – Wednesday the Index set a pipe reversal, the most important observation is last Thursday’s “retest” of the high but failing to follow through higher. This will be classified as a “Bull trap” with the potential to retest the 7216 level and will be viewed as a continuing consolidation flag. The first indication of Buyers re-entering the market will be a close over the 7406 level.

 

Indicator:  Relative Strength 14
The Relative Strength Indicator 14 shows a loss of price momentum, sometimes this indicator shows the obvious, and in this case would be monitored for a close below the 50 level.

 

Indicator: VOLUME  
Trading volumes have increased on Wednesday’s and Friday’s down close. Signalling some distribution.

Black and White Technical Report: The Week Beginning 2/08/2021, FP Markets

Comments from last week:  The current consolidation looks to be complete with the 3 low points highlighted within this price discovery area. The record close following the pivot point set last Wednesday, has followed through, current price momentum would suggest higher price in the early days of this week.

 

S&P 500 WEEKLY
Price structure:
The small range of last week is not a bullish signal for further gains. With the OPu from 2 weeks ago remaining the dominant range to overcome. 4240 remains the first level of support with 4150 the real key support in this current range. There is no topping pattern in this chart, but traders should monitor the support levels in the coming weeks.

 

Indicator:  Relative Strength Indicator 14
The Relative Strength Indicator has re-emerged and remains 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 takes place.

Black and White Technical Report: The Week Beginning 2/08/2021, FP Markets

Comments from last week: The S&P 500 has claimed the 4400 level. Last week’s (OPu) Outside period up close, first tested the 4240 support level before closing at an all time high. Traders are more than aware many reversal signals have failed in this Primary UP trend, however price parameters should be monitored. In this case a weekly close below 4240 would set a bearish tone following last week’s high close.

 

S&P 500 DAILY
Price structure:
The Fake out move last Thursday has the potential to follow through lower in the coming days. The underlying trend line remains as tentative (2 points), as price consolidates at this level a retest of the trendline may occur in the coming days. The chart looks to set up a range trading window between 4240 and resistance of 4394. Traders would look for the first close above 4394 as a bullish signal for the following days.

 

Indicator: Relative Strength 14
The divergence Sell signal is now complete. The RSI move below the 70 level shows slowing 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 4240.

Black and White Technical Report: The Week Beginning 2/08/2021, FP Markets

Comments from last week:  Last Tuesday set a strong pivot point from the Monday retest of 4240. The current follow through is strong with Friday’s “opening gap” large range bar, setting the stage for a 150 point measured move for this consolidation area. The short term 4394 is the daily closing price support level to hold in a price reversal scenario. Should the market close below this level, traders would be on alert for support at the weekly level of 4240.

 

NASDAQ DAILY
Price structure: Our first look at the NASDAQ
Following the release of results from Amazon. The Nasdaq “gapped” down on Friday. This type of Gap is a buying gap, as no new low has been made on the day as buyers immediately entered the market. The underlying Primary trend in the Nasdaq is up, this remains intact and could be expected to continue with a retest and breakout of last Monday’s highs. (see RSI note)

The short term trend line remains in place and may provide some support on any sideways consolidation.

 

Indicator: Relative Strength 14
The Relative Strength Indicator has turned lower 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.

Black and White Technical Report: The Week Beginning 2/08/2021, FP Markets

Comments from last week:  Like many other Indices’ the Nasdaq set a Bullish pivot point on Tuesday. With the underlying primary trend resuming to see the Index set a new high. The strong range on Friday is a good signal for further gains in this seasonally bullish period. Support at 1500 is now the critical psychological level to hold in the short term. A strong close below this level may see a retest of 14595. However, the Primary trend remains UP and retracements are part of that trend structure.

 

USD Spot GOLD – DAILY     
Price structure:
If only the Gold bulls would look at the Chart!

A clear picture of a secondary consolidation taking place. A clear picture of resistance at $1835.0 and support shown at $1785.0 without any indication of a directional move. The range is highly tradeable, closer inspection of the bars at the support level shows a number of lower shadows consistent with buyer support, whereas rejection is immediate at the resistance level.
Traders may find a false break of the $1785.0 support level as the signal for a breakout higher is coming.

A false break would be a price bar breaking the support level and closing above the support level.

 

Indicator:  Relative Strength 14
The Relative Strength is heading back below the 50 level, a signal of decreasing price momentum and should be monitored for a further move lower.

Black and White Technical Report: The Week Beginning 2/08/2021, FP Markets
Comments from last week: Gold continues to trade lower than the January 2nd 2021 open. Currently 4 weeks of secondary consolidation continues with consistent closes above the $1800 level. Inside the past 7 days an a, b, c pattern can be identified, this may signal the completion of the markdown from the $1840 price area. There is nothing bullish in this current chart formation other than potentially more consolidation above the $1800 level.

 

SILVER DAILY    
Price structure:
Last week Silver set up the false break scenario (see Gold notes) with an immediate move higher. With the price now retesting the $25.52 level and the short down trendline, the next move will be decisive for traders. With the positive divergence signal now complete, a breakout higher, is the better probability.
The daily trend for Silver remains down, but divergence signals are a very positive setup for trend reversal and further gains.

 

Indicator:  Relative Strength 14
The Bullish divergence pattern is now complete, the RSI has moved above the inner Buy line (red). With improving momentum, a continued move over the 50 level would signal positive price momentum.

Black and White Technical Report: The Week Beginning 2/08/2021, FP Markets

Comments from last week: This week Silver entered a primary downtrend with the major support level of $26.00 giving way to the breakdown below the $25.52 level. Without a bullish catalyst Silver looks set for further consolidation and range trading between $24.60 and $25.52. Traders would monitor this pattern for a move below the 30 level and potential Bullish divergence signal.

AUD GOLD DAILY    
Price structure:
A very positive development as a CUP and handle begins to show below the $2,477 level following the initial rejection at this level 9 trading days back. The chart picture from the March 2021 lows is a series of higher lows. The larger resistance level at $2541 resistance is the first target on a continued breakout.

Indicator: Relative Strength 14
Relative Strength moving back below the 70 level is in line with price movements. Look for  the continued rise in the RSI above the 50 level with price retesting the 2477 level in the coming weeks. 

Black and White Technical Report: The Week Beginning 2/08/2021, FP Markets
Comments from last week:
 The midweek breakout above 2477.0 resulted in a “shooting star” reversal, this chart remains bullish as Friday’s close shows a bullish hammer bar within the current PRIMARY UP TREND. Look for a higher close over the Hammer bar to set a pivot point reversal, failure at this level may see $2400 retested again.

 

COPPER DAILY   
Price structure:  LME Inventories remain historically low.
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. 

 

Indicator: Relative Strength 14
Confirmation of a loss of momentum is shown as the RSI moves below the “70” and 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 2/08/2021, FP Markets

Comments from last week: Last week the strong OPu bar closed strongly above the “midpoint” resistance level of $4.33, this is a very strong signal for further gains with a retest of $4.50 the key test in the coming days.  The a, b, c pattern now looks complete without the potential retest of $4.00 mentioned last week.  The underlying Primary UP trend in Copper looks to be resuming.

 

AUSTRALIAN VOLATILITY INDEX
Volatility remains subdued within the “Bullish for equities” range between 11 and 13. 

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 higher than the previous week.

The maxim for volatility remains that low volatility leads to high volatility and vice versa.

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 2/08/2021, FP Markets

Comments from last week: Last week’s volatility spike higher was quickly reversed back into the Bullish range, This looks bullish for equities in the coming days. A reading over the 13 level is a bearish signal for equities.

 

USD DOLLAR INDEX  
Price structure:
The trading range between 91.66 and 93.45 continues to develop. The reversal bar set last Friday shows the buyers again entering the market at the support level. The close over the 92.07 level is a bullish signal for further gains to retest the 93.45 level.

 

Indicator:  Relative Strength 14
Relative Strength has completed the bearish divergence with the dip below the 50 level. This would now be monitored for a continued move higher in line with price gains.

Black and White Technical Report: The Week Beginning 2/08/2021, FP Markets

Comments from last week:  This DXY chart may remain range bound between 91.66 and 93.45. The message is in the RSI reading (below). With individual price bars “overlapping” each other the market seems directionless and consolidation may prevail.

 

WTI CRUDE OIL
Price structure: This commodity is news driven by supply -demand.
The hammer bar of 2 weeks ago has followed through with a new pivot point (bar) now in place. At this point the resumption of the up trend is resuming a further price close over the $75.20 level would be an important development.  The underlying Primary trend remains intact with a potential +$10 move underway. The ultimate target remains at $100 bl.

 

Indicator: Relative Strength 14
RSI turning lower below the 70 level, in line with current price moves only confirms the underlying price momentum is slowing. With the pivot bar in place the RSI turning higher from above the 50 level is a good momentum signal for further gains. The RSI divergence signal has failed to register a sell signal and would now be disregarded in the event of higher prices.

Black and White Technical Report: The Week Beginning 2/08/2021, FP Markets
Comments from last week
: This is such a great technical chart! The OP reversal to retest the $66.0 level with a Weekly hammer now in place. With the underlying Primary UP trend already in place this current retracement remains a bullish setup for further gains to retest the $75.20 level and potentially higher. The ultimate target remains at $100 bl.

  • Black and White Technical Report: The Week Beginning 2/08/2021, FP Markets
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