XJO WEEKLY
Price structure: Outside range.

The XJO Weekly chart has set an “outside period” with a long-range bar high to low. Using the Haguro method this type of bar (#9) with a lower wick exposed is identified as a turning point bar when found in a high price area following the August low point. When this is a long line, selling is indicated when trading in the direction of the underlying movement and TREND. This line indicates an end to the current movement, confirmation will show as a close below the 7910 level.

Indicator: Relative Strength 14 – Back to Neutral

Relative strength has turned lower in line with the long-range price action for the week and still remains above the key 50 level from the bullish momentum within the previous 14 bars. Only further movements higher towards the 70 level can set a continuing bullish signal for further higher price movements. Should the RSI reading move below the 50 level, the strong indication is for negative momentum to develop leading to Trend failure and further consolidation.

Comments last week: The Weekly chart shows another small range low to high advance, the current close at a Weekly all-time high is an important observation as no broad profit taking has taken place indicating sentiment remains strong. Current observable price rejection (FO) still remains from above the 8083 level. This week key support above the 7910 level is critical with the current close over the important 8083 level, further short term advances could be expected. The final stages of the Australian FY reporting were completed last week.

XJO DAILY
Price structure: Developing Reverse point wave.

The reverse point wave structure discussed last week has developed further, setting a marginally higher point before the impulsive move lower. Key support at 7910 has again been tested with an immediate move higher last Thursday and Friday. The short-range set against the “impulsive” move lower sets up a Bearish Flag pattern for further declines. A volatility test to the Reverse point wave low at 7632 points would not be out of the question.

Indicator: Relative Strength 14: Bullish

The Relative Strength Indicator (14) has turned sharply lower into the close last Wednesday while moving below the key 50 level the outlook is loss of momentum. Traders would be looking for further BUY momentum should a continued price move occur only with the RSI continuing to rise while over the “50” level targeting 70.

Comments from last week: The dramatic decline of early August has been recovered, the current risk is a new Daily high being set, a reversal from a new high will confirm the “Reverse point Wave” pattern of higher highs and the lower low within the development of price movement. The Reverse point Wave is a topping pattern often with a sharp decline developing from the new high. Currently the Index must set a new high towards 8300 with a swing reversal completing the pattern.

S&P 500 WEEKLY: Double top confirmed.

Last week the reversal signal has occurred and confirms a Double Top is now in place as the Index fails to take out the 5670-level discussed last week. The measured move target is the long term Trendline. With momentum declining sharply (see RSI note) a close below the 5100 level initiates a bearish signal for further declines over time. The current prime trendline target is also the November 2023 breakout level of 4545 points. Indices are considered forward looking at economic conditions, some of which are indicating a US recession.

Indicator: Relative Strength Indicator 14. Divergence

Relative Strength has turned lower as strong price momentum has given way. The RSI (momentum) value has remained over the key 50 level during this Primary UP trend.  

A turn lower towards the 50 with any Index price movement towards the 5400-point level and below will re-assert a full bearish RSI signal. The current position of the Relative strength indicator has a second Bearish divergence signal confirmed.

Comments from last week: The sharp recovery from the “Gap open Buy” signal set during the early August decline has followed through to see the Index retest towards the 5670 level, currently the Index has the potential to set a double top pattern should a reversal signal be given. Continued Weekly closing prices above the key 5670 level would negate the potential for a double top reversal confirming the overall Primary UP trend remains intact.

SPX DAILY Price Structure: Bullish flag failure.

Failure of the potential developing Bullish Flag has closed the first “Gap” at 5400 points the next lower “Gap” is shown at the 5100 level coinciding with the 200 day moving average value and the approximate value at point “c” of the initial decline during July. Large range days will give way to consolidation periods as seen during last Wednesday / Thursday however without a clear reversal signal the lower targets remain in place.

Indicator: Relative Strength Indicator 14

Relative strength Indicator has fallen below the 50 level into last Friday’s close, traders should consider a further decline below the 50 level as a Bearish negative momentum signal. Only with a continued move higher above the “50” level the expectation of further advances remains. Relative strength is a momentum indicator, only a swing back higher towards the key 70 level would set a very strong Bullish signal that should not be ignored.

Comments from last week: As the Index Daily movements consolidate below the 5670, the overlapping Daily bars have developed into a Bullish Flag pattern, this pattern targets 6000 points. Bullish Flag patterns can fail, an indication of this would be for the Index to close lower into the 5500 Gap area. Considering the sharp fluid price movement to recover the highs set during July further consolidation to prove buyer support would be a strong outcome.

NASDAQ (100) DAILY Price structure: Bullish flag failure

Failure of the developing bullish flag with a solid close below the 18,464 level, the Nasdaq is now taking out levels set during February, March and April this year as the lower high is confirmed. Placing this year’s buyers into a losing position. This type of decline will gather further momentum should the key level of 17,800 not provide a technical price support level for a reversal. A break and close below the 200-day moving average would be a significant development in the early stages of a developing Bear market.

Indicator: Relative Strength 14

As the Relative strength has now moved below the key 50 level, mirroring the declining price / momentum. Relative strength rising and remaining above the important 50 level is required before a Bullish momentum signal can be declared. This can provide some early insight for Major Primary UP trend continuation. As consolidation may take place the RSI value will move to the “50” and would further confirm a loss of overall upward momentum.

Comments from last week:   As with the S&P500 the Nasdaq has developed a Bullish Flag pattern as price overlaps the previous sessions setting a slow decline. The Tech heavy Index has consolidated around the recent reporting including NVidia not surprising the market with strong numbers. Without a catalyst for further gains the Nasdaq is at risk of confirming a lower high.

USD Spot GOLD – DAILY: Further consolidation above $2,483.0

USD Gold is developing a strong support level at $2483.0 with a further of this level during the past week. Strong resistance remains at $2531.60 with last Friday testing both levels during the session. The price target of $2570 remains in place in the current Primary UP trend. As the price of USD Gold continues to close above $2483.0 the prospect of further gains remains the better trade.

Indicator: Relative Strength 14: Bullish

The RSI has turned higher and remains above the 50 level. As price consolidation takes place the RSI naturally moves towards the 50 level until a directional move takes place. 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. A further close over the $2570 level would negate this view.

Comments from last week: USD Gold remains within a consolidation pattern above the now key $2500 level. The $2570 price target remains in place as the underlying Primary trend is UP. Gold closing below the $2483 would indicate a reversal in place with the potential to retest$2431.0 and lower. The current consolidation is regarded as Bullish with continuing Daily closes towards the $2520 level, traders would look for a close above this level to confirm a Bullish move underway.

SILVER Price structure: Downtrend.

Silver has again set a bearish pivot point with further declines expected to retest the $27.00 level. Silver remains within a Technical Primary DOWN Trend following the lower high set 2 weeks ago. For a technical reversal to apply USD Silver must trade back over the $30.0 level to set a new high over the recent August high. Currently at best USD Silver remains within a large consolidation zone with resistance at $32.50 and support shown at $27.0. A break on either side would be a significant development.

Relative Strength 14:

Over the past 3 months the Relative Strength has steadily declined and has again moved below the 50-level moving towards the 30 level, indicating a sell signal. Last week’s commentary included this, “The RSI should be monitored for a continued move below the 50-level indicating MOMENTUM FAILURE”.  Last Friday’s close saw the indicator turn lower, with a cross below this key level. The current declining momentum sets the Trendline target of $27.0 until a reversal pattern is set.

Comments from last week:  Again, traders are reminded Silver is not Gold. Last week USD Silver closed back onto the $28.80 level, a level that has been in play as Support and Resistance for over 3 years. Several weeks ago, I discussed this current advance as a Corrective move within a Down Trend. For Silver to confirm an UP trend a close over the recent (FO) high over the $30.0 level is required.

AUSTRALIAN VOLATILITY INDEX: The equities trader’s compass.

The current volatility closing value has moved to close back below the key 13 level following a spike higher during the past week.  Current closing value indicates the XVI volatility level has moved back to the Bullish level for Equities level. Markets are starting to price in future downside protection. 

With the indicator value moving higher, the forward pricing (Volatility) of PUT options (insurance) is increasing, this is observed against a Bearish reversal in the market indicating market participants believe equity price movements may turn lower. 

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

The cost of 3 month forward PUT options is moving higher from recent lower 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 this longer dated forward price change, or “skew” in pricing is measured in this XVI.

The XVI value works as an inverse correlation to the underlying market.