XJO WEEKLY
Price structure: Consolidation remains

The month of July historically remains a bullish month for equities, with an over 90% potential outcome for the Index to end higher for the month. However, history shows that the month often has significant declines in the 1st and 2nd weeks. Currently, the XJO 200 remains in consolidation, with Resistance at 7910 points and Support shown at 7632 points. Traders would look for a breakout higher to confirm a new all-time high. The longer lower wick of last week is a bullish observation with a breakout higher possible.

Indicator: Relative Strength 14 – Neutral

Relative strength has turned lower as part of the current consolidation. Only further movements towards the 70 level will remain a bullish signal for further price gains. However, during range price consolidation, the RSI naturally moves to the neutral 50 level.  Should the RSI reading move below the 50 level, the strong indication is for negative momentum to develop.

Comments last week: Further consolidation in the Weekly chart as the Index remains between 7632 support and 7910 resistance. This period of consolidation does not change the current UP trend. And remains a bullish consolidation above support, the expectation is for a breakout to the high side, based on the current range low to high has recovered more than 50% of the prior week’s decline. The month of June is marked with Tax loss selling as the end of the financial year approaches.

XJO DAILY
Price structure: Pennant complete.

The Daily view shows the developing “Pennant” with 7700 points as the internal support level. The pattern now has 3 significant low points (1,2 & 3) and has developed along to the approximate 2/3 area before the Apex point, this deems the pattern complete with the potential for an immediate breakout. As the trading swings narrow, a bullish breakout is imminent with the current short-term target remaining at 8000 points.

Indicator: Relative Strength 14

The Relative Strength Indicator (14) has turned sideways into the close on Friday, the overall neutral momentum is a result of the smaller price movements that also reflect in the Relative strength moving to a neutral reading (50). This is the level where traders would be looking for a further buy signal above the 50 level, but with the current readings at the “50” level now, the potential for a Bearish reversal remains a concern.

Comments from last week: Last Friday saw the index advance from the two small range days following the “Pivot reversal” set last Tuesday. Internal support at 7700 points has held last week, to set a short-term base.  Early signs of Trend failure will be identified, when price closes below this critical level.

S&P 500 WEEKLY: Exhaustion

The Us Indices remain within a Primary upward movement; rejection of higher prices last week is evident in the long upper wick. Some form of consolidation should be expected at this level. As the weekly ranges become shorter the indication is buyers are becoming weaker with the Index expected to consolidate or decline as profit taking occurs. Should a decline take place first support is expected to be at the 5270 breakout point 7 weeks prior to last week.

Indicator: Relative Strength Indicator 14. Bearish divergence

Relative Strength has turned sideways as the momentum indicator set a lower high indicating a Bearish divergence signal. With the reading moving over the 70 level, and turning lower, momentum is declining, as discussed last week. A further turn towards the key 50 level, with any Index price consolidation towards the 5270 level may re-assert a further bearish RSI signal.

Comments from last week:  The current breakout above 5270 continues to move above the short-term trendline. The Index is currently being lifted by the overweight Tech stocks with falling market breadth (Bearish) behind the leading TECH sector. The S&P remains at risk of a corrective move lower. The current breakout is in line with the Primary UP trend and has met the target of 5500 points. A closing price below the short term trendline will offer the first signal of trend reversal.

SPX DAILY
Price structure: 2nd Key Reversal in place.

Eight sideways trading days above the “Gap” and 5400 point level, with a 2nd OPd  ( outside range down close ) in the immediate price may retest the “Gap” area. History shows the OPd results in some form of price decline or further consolidation. A break of the short-term trendline would send an immediate bearish signal with the potential for further downside. 

Indicator: Relative Strength Indicator 14

Relative Strength Indicator has moved below the 70-level indicating a decline in Bullish momentum and is currently turning lower (Friday) from above the 70 level. A continued move lower towards the “50 level would be a bearish signal with the expectation of further declines. Relative strength is a momentum indicator, a swing back towards the key 50 level would be a Bearish signal that should not be ignored.

Comments from last week: The S&P Index has again set an Outside period down close (OPd) Thursday, this is a key reversal signal and must be resolved to the upside quickly to show buyers remain in control. The recent price Gap remains the primary target on any follow through should price decline in the coming days. On this chart historically, the OPd has halted price movements with the largest decline occurring during March April 2024.

NASDAQ DAILY Price structure:  2nd Key reversal in place

Eleven sideways trading days while above the recent “Gap” the Index has set a 2nd OPd last Friday while the high of the day was an all time high, so the Friday bar is a “Fakeout” high indicating sellers at the 20,000 point level. Historically the OPd leads to some form of decline if only for a short period. The Gap remains the first target area at 19,350 points.

Indicator: Relative Strength 14

Last week saw the momentum indicator turning lower from the key 70 level. The RSI could now be monitored for a potential further movement lower below the 70 level towards the 50 level, indicating the first slowing of bullish momentum move is underway, this may provide some early insight to overall Primary trend reversal. Relative strength moving higher above the important 70 level shows Bullish momentum remains strong.

Comments from last week: As with the S&P, an outside range down close has halted the recent price advance to just below the 20,000 level. The current price has moved to a level that remains further “extended” from the 200-day moving average similar to the February 2024 levels that saw some follow-on consolidation take place. The first signal of a Bearish reversal will be a close below the “GAP” level. The underlying Primary trend remains UP.

USD Spot GOLD – DAILY: Key support holds

The Bearish flag discussed last week has played out lower, to again test the $2288 level. The descending pattern has the potential to retest the $2222.0 level on a decisive break below the current support. It was discussed in this report back in April that Gold may be forming a multiyear high and move into consolidation in the months following the April high. The downside measured target of $2135.0 remains in place as Gold begins to enter a Primary down trend.

Indicator: Relative Strength 14

The RSI is turning lower, and has closed below the key 50 level again.  The Relative strength is a momentum indicator and has turned negative at these levels indicating real price momentum over the current 14 day look back period remains weak.  Long term traders should monitor this Daily chart for a 5th major yearly top developing at this level with further declines in the long term.

Comments from last week: The constrained rally in Gold saw the $2,360 level tested with immediate selling lowering the price to the lower level of this Bearish Flag pattern. A further breakdown below this important $2288.0 support level would see significant selling take place with $2222.0 as the target level. As Gold remains within a trading zone with Resistance shown at $2431.3 and Support indicated at $2288.0, a move below this level has a developed price target of $2,135.0.

SILVER Price structure: 2nd Bearish flag

Key historic support levels have again provided price support in the past week. The current price ranges again suggest a “Bearish flag is developing. A further break lower would target the March 2022 level of $27.00. Silver has the potential to enter a Primary downtrend on a price movement below the current support level.

Relative Strength 14:

Currently the Relative Strength is moving below the 50 level, indicating price is now playing out into a full sell signal. Only a continued move higher and over the 50 level would reflect a solid change in the underlying price momentum as the Primary UP trend rolls over to enter a Down Trend.

Comments from last week: Silver set a small Bull trap last Thursday as price moved higher over the $30.0 level with immediate selling on Friday setting an Outside range down close (OPd). The market has moved back into the small consolidation range below the $30.0 level and above the $28.80 support level. Silver along with Gold may now enter a long period of consolidation following the recent seasonal move higher.

AUSTRALIAN VOLATILITY INDEX: The equities traders compass.

The current volatility closing value has moved to close above the 11 value following a further move lower below this key 11 level. Closing value indicates the XVI remains within the “Bullish for Equities” level. 

With the indicator moving lower early in the week, the forward pricing (Volatility) of PUT options (insurance) was decreasing, this is observed against a flat market indicating market participants believe equity price movements may turn neutral, as the cost of 3 month forward (insurance) Put Options were slowly increasing, suggesting the market is moving towards an active early bullish outlook.

For continued support of equities, the XVI should remain subdued below the “13” level.

The cost of 3 month forward PUT options is decreasing from recent elevated levels.

The XVI is the difference between 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 correlation to the underlying market.