Global Indices continued higher last week, however the final session on Friday has uniformly posted a short term reversal signal.
The late week rise in the XVI value (volatility) underscores the reversal signals in the Major Indices, forward PUT Option protection is now being priced in.
As economic recessionary clouds gather over the markets, the Dow30 Industrials and the Dow Transports have diverged and no longer set a bullish signal.
These volume profiles need to improve to underpin continuing Bullish moves.
Gold and Silver continue to remain under pricing pressure developing further consolidation at these current levels.
The outcome for local producers remains weak on the back of a stronger $AUD.
The XJO has again found resistance at the 7530 level with price rejection to close at 7493 points. This level has provided resistance for the past 9 months; a close above this 7530 level would be a significant change and set a bullish signal for further gains. Considering this is the 3rd straight week of gains, some profit taking could be expected in the coming week.
The Relative continued higher and again closed above the key 50 level. Price momentum remains positive, this will now be monitored for a downturn should prices consolidate below 7530 points. As the Relative Strength Indicator reflects price momentum the current weekly closing price displays increasing positive price momentum.
Comments from last week: Last week saw the follow-on from the earlier Pivot bar reversal. The weekly range is short by comparison to recent price ranges, however the close is towards the high. Identified as a Fake out having crossed the previous Spike high point, the close above this level is important for further movement higher. This week may see a continued move higher; a close over the 7530 will be an important observation. Price failure to reach this level will give an indication the current to move is a Bear Market rally.
Late last week the Index set a shooting star (Thursday) followed by the small Doji bar to close the week. The final 3 bars have set a 3 Bar reversal pattern and should be monitored for further declines below the minor 7492 support level. Following the strong gains from the previous 11 sessions, profit taking could be expected, the level of decline may test the first support level at 7370.
The Relative Strength Indicator (14) reflecting the underlying price momentum has moved lower from the 70-level indicating a shift to increasing slowing momentum. Only a further cross above the 70 level will provide a signal of strong price momentum.
Trading volumes have been relatively low during the past week leading to last Thursday’s high volume close. The volume will be monitored for any further decrease as a signal of buyers unwilling to enter the market. Strong volumes over 1Bil on a Daily basis would indicate strong buying.
Comments from last week: Last week saw 4 Daily higher closes, with Friday showing a small rejection range from the high.The 7370 area is an important support level to hold in the coming days. Overall, the daily advances are becoming shorter from the strong rally 2 weeks ago, not a great signal for immediate continuation.
The months a, b, c retracement has set a Downtrend in place, this current rally can be seen a “corrective” within an early Bear market. The significant Support – Resistance level of 4545 is again in play with the S&P 500 again showing higher price rejection above this level. The low close in the range has set “a shooting Star” for last week. This identified reversal bar may see prices follow through lower to retest the 4320 level of support, a very important level to hold for the market to remain Bullish.
Price movements are considered positive with a reading above the 50 level, with this continued reading turning sideways while above the key 50 level indications are that price momentum is slowing, an ongoing reading falling below 50 would confirm the Bearish rejection bar set in the price chart. The potential for an accelerated move higher remains as the momentum reading remains above the 50 level.
Comments from last week: The S&P 500 has reached the 4545-inflexion point, a move higher from this level would be an important development in the continuation of the overall UP trend. The current breakout following the a, b, c decline may be the Bear Market rally that often shows in the early development of tops. This Weekly Chart will be monitored for a Weekly reversal signal in the coming weeks.
The “Gap open Sell” signal from Tuesday past has played out with the S&P moving below the key 4545 level. The small bullish bar on Friday’s close may follow through higher, however a Bearish Lower high has been set with last Friday’s trading bar potentially being a “retest of the high. The key observation is last Thursday’s large range movement. With a further decline, the first Daily support level is shown at 4420. As set out in the Weekly comments, the recent move higher is regarded as “corrective” only.
Relative Strength Indicator (14) has again turned sharply lower below the key 70 level. A continued lower close towards the 50 level would alert traders to further decreasing price momentum.
Comments from last week: The Daily chart of the S&P 500 offers a very bullish picture following the Wednesday down close bar attempting to retest the 4420 level. The current move over the high of that bar (pivot reversal) is a very strong bullish signal. However the 4545 level is key for the coming week, a close above this level would confirm the Buyers are in control.
As with the other Major indices, the Nasdaq has also posted a “Gap open sell” signal following the recent “corrective” movement higher from the 13243 level. Basic trend analysis would suggest a further decline to retest 14535 and potentially 14076 points. As part of the process the high of 15,265 may be retested in the coming days, only a close above this level would indicate a further bullish move higher.
Relative Strength has turned sideways but remains above the key 50 level, changing to neutral price momentum from the 14 day look back period.
Comments from last week: The continuing strong advance in the Nasdaq has also overcome last Wednesday’s price resistance at the 14535 level. With the current price moving over the last high point set in the first week of March, the move is considered “corrective”. To confirm a trend, a retracement to set a higher low and price to follow on to set a new high is required, until then this is a corrective move.
This is not Bull market price activity. Current price action is regarded as a Secondary movement (consolidation) in this case Bearish consolidation. The $1916.40 level is now the key support to hold in the short term; a break of this level would see a retest of the $1876.90 level and potentially lower. Ultimately Gold may set a new Primary UP trend for fundamental reasons, however current price action suggests further consolidation above $1876.90.
Price momentum has rolled lower, the indicator continuing to move below the 70 level will be the critical observation this week as a signal of continuing weakening price momentum may move below the 50 level.
Comments from last week: To see a Bull market, develop from the recent “flush” higher above USD$2000 the current resistance of $1966 should be broken decisively. Last Thursday and Friday saw two failed attempts at moving over this level. Currently Buyers are providing support at USD$1916.40 with Sellers at USD$1966.80 hardly Bull market price action. Until a price breakdown below the 16/03/2022 low of $1894.70 USD, Gold remains within a primary UP trend.
The price chart of Silver continues to develop a complicated Bullish Flag as price probes lower below the $23.73 level. Last Tuesday saw the “retest” of the downtrend line with a solid close at the $23.73 level, the key observation here is there was no follow-through higher with last Friday closing below this key level. Silver continues to remain within a large multiyear consolidation above $21.50 and below the $27.0 level.
Current Relative Strength is moving below the 50 level and now turning lower shows price momentum is decreasing in this retest of the $23.73 area. A continuing move above the 50 level and higher would be very bullish in the short term, and the potential for a further rally remains as price consolidates below the $23.73 level.
Comments from last week: Silver seems to be stronger than the Gold / Silver pair with price initially closing over the $25.40 followed by the current retest last Friday. A follow-through to test the high at $27.0 would confirm a bullish outlook. USD Silver has buyers at the $23.73 level with sellers at $25.40. Silver remains within a large consolidation zone and importantly did not retest anywhere near the all-time high in line with Gold during the March rally.
The current price action within this Australian dollar Gold reference will not fare well for the local producers in the short term. The 3 Bar bullish reversal referred to last week has failed to follow through higher. With price now consolidating above the key $2541 level and below $2600, this tight range becomes a low volatility area that will ultimately breakout in a volatile move.
Relative Strength has turned lower from below the 70 level and moved below the key 50 level. With the loss of positive momentum, Relative Strength may continue to track sideways during any potential consolidation period.
Comments from last week: A stronger $AUD has placed pressure on the $AUD XAU price. The key support is $2541.0 with last week setting a 3-bar reversal pattern. For this to play out an Increase in the USD Gold price is required or a decline in the AUD$. Currently the view is for consolidation above $2541.0 based on the USD Gold price.
Another week of consolidation in the Copper chart, however last week saw a lower high and lower low compared to the previous week. This may build into a Bullish flag with the potential to retest the $4.90 high price area. The whole price structure from Q1 2021 remains bullish as resistance levels become support levels; the most recent is the $4.50 level acting as price support 3 weeks ago.
Current reading has swung sideways above the 50-level reflecting the current consolidation move underway. The key for now is the RSI remains above the 50 level as a reflection of ongoing and any positive underlying positive price momentum.
Comments from last week: An important distinction to observe in the Commodities space, given Copper is in short supply ( but not largely supplied by Russia) price has remained relatively stable during this metals supply crisis. Currently with support shown at $4.50, and the failed retest of the $4.90 high, consolidation at these levels is developing with a further retest of $4.50 in the coming week.
Last week saw underlying volatility again decline sharply as markets price in some clarity around interest rates and the Ukraine war. The late week rise in the XVI value underscores the reversal signals in the Major Indices; forward protection is now being priced in the Options market. Only a further decline in the XVI this week would provide a Bullish undertone for markets as future risk coverage is removed.
The XVI is the difference between 3-month forward pricing of ETO Options against the 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.
Comments from last week: Forward pricing of PUT options remains on a high skew to current pricing. The market is paying the highest prices since Q4 2020 prices for forward protection. The outcome remains Bearish pressure on local equities.
A bullish move is underway as the 97.75 level finds buyers. Last Wednesday / Thursday saw the third retest of this level. This current price action is very bullish for further gains, with the potential to retest the 100.5 level in the coming weeks.
Relative Strength has turned higher in line with price movements and should now be monitored for further strength as the current reading over the key 50 level should move higher, a further reading above the 70 level would indicate very strong positive price momentum.
Comments from last week: The bear flag developing above the 97.75 level has the potential to target a retest of the 96.93 level in the coming week. The USD is capable of trading within a range over extended periods this has the potential to do just that.
A retest of the high has failed to show as a new Bearish pivot bar is now in place. The first level of support to monitor is $93.53 looking for price consolidation at this important level. With the underlying Primary trend remaining UP, the current retracement may test the longer term trendline around the $84.25 level. The $84.25 level is also the breakout level of 11 weeks ago.
The current price reversal has produced a new low in the RSI, this will again be monitored for a developing divergence signal, although it may take many weeks to develop. Relative strength crossing and remaining below the 50 level is regarded as a Bearish Indicator.
Comments from last week: The West Texas contract has set a new Bullish Pivot bar in line with the Primary up trend already in place. The potential is to retest the highs over $136.00. The closing high price set at $115.68 may provide resistance on the way through. Should price rejection occur at these levels the breakout level of $93.53 (already tested two weeks ago) will again be the level to hold.
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