XJO WEEKLY
Price structure: Consolidation pattern remains

Last week the Index set a higher low and closed the week at the high range, although an Inside Period (IPu) the outlook remains bullish for a retest of the 7910 resistance level. With 23 weeks of trading above the 7632 level, within a 278 point range, the consolidation zone is without a Bearish pattern. A further breakout above the 7910, has the potential to lead to a broad based rally. Stocks with strong dividend returns would be favoured in the July rally.

Indicator: Relative Strength 14 –  Remains Neutral

Relative Strength has turned sideways as part of the current consolidation. Only further movements towards the 70 level will remain a bullish signal for further price gains. However, during ranging 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: 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 often the month has significant declines in the 1st and 2nd week. 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.

XJO DAILY
Price structure: Pennant complete.

The “Pennant” pattern discussed last week continue to develop into a breakout higher with the 3rd low (3) now confirmed. The strong impulsive movement last Thursday followed by the short range set on Friday’s close indicates a follow though has the potential to retest the 7910 level and make a break towards 8000 points. The consolidation period now extending to over 6 months, may develop into a new Primary UP trend.

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 calculate 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 a reading at or below the “50” level, the potential for a Bearish reversal remains a concern.

Comments from last week: 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..

S&P 500 WEEKLY: Bullish advance

The S&P500 has set an extended Bullish Weekly range low too high to again, set a new all-time high. The expected rejection of higher prices following the prior week setting a long upper shadow has not followed through. This can only be described as an extended move, the concern remains the Index is being driven higher on a few Tech stocks. Without a broad based rally the underlying momentum can change very quickly.

Indicator: Relative Strength Indicator 14. Bearish divergence

Relative Strength has turned higher as the momentum indicator remains at a lower high indicating a Bearish divergence signal. With the reading moving over the 70 level, and turning higher, momentum is strong. A further turn towards the 70 level and the key 50 level, with any Index price consolidation towards the 5400 level may re-assert a further bearish RSI signal.

Comments from last week:  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.

SPX DAILY
Price structure: Extended movement

The OPd discussed last week has failed to set the Index into consolidation or see any decline towards the “GAP” area below the 5400 level. Index Daily movements have set a “Primary” move in place, extending further away from the 200 day moving average. Historically this type of movement has continued to set higher prices. Without a reversal pattern in place the Index targets 5600 points.

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: 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.

NASDAQ DAILY Price structure: Extended movement.

With a strong advance in the Nasdaq the Bearish OPd described last week has failed to consolidate the price movements at the 20,000 level. The Index has set a Bullish Primary movement, extending the Index further higher away from the 200 day moving average. A price decline finding support at the 20,000 level is a Bullish pattern and may see the market extend further towards 21,000 points. The underlying movements are being driven by the Technology sector with approximately 45% of stocks above the 50 day moving average.

Indicator: Relative Strength 14

Last week saw the momentum indicator turning higher above the key 70 level. The RSI could now be monitored for a potential Bearish divergence signal with a 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 (not over brought).

Comments from last week: 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.

USD Spot GOLD – DAILY: Bullish breakout

The final bearish flag has failed with the price movements now trading higher away from the descending pattern. The $2288.0 level is now a Major support level. The strong range low too high set during last Friday’s trading could be expected to follow through to higher prices this week. Gold remains within a large trading range with the resistance level at $2431.0 remaining the key resistance level for buyers to maintain control and set a new breakout.

Indicator: Relative Strength 14

The RSI is turning sharply higher, and has closed above the key 50 level again.  The Relative strength is a momentum indicator and has turned positive at these levels indicating real price momentum over the current 14 day look back period has moved to a positive reading.  Long term traders should continue to 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 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.

SILVER Price structure: Impulsive movement

Silver has set an impulsive breakout move from the now failed Bearish flag pattern discussed last week. The retest of $28.80 has established this level as a strong support level for potential future retracements. Silver again targets the $32.50 resistance level as the metal remains within a developing consolidation zone between $28.80 and $32.50. The current breakout moves away from the potential for a Primary Downtrend to develop.

Relative Strength 14:

Currently the Relative Strength is moving above the 50 level, indicating price is now playing out into a buy 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: 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.

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.