Major Indices has set reversal signals in a late week rally as a potential short covering rally.
The Bear market down trend remains in place, this current rally in US indices is required to post a “higher low” before it can be considered a Trend reversal.
More importantly the Australian XJO has not broken the primary UP trend and remains within a 12 month consolidation zone.
Gold, Silver and Copper continue to test lower support levels with Silver showing a breakdown below the $22.0 support level described last week.
Gold traded to an important support level of $1800 with weak intraday support indicating a potential move lower, see chart below
Oil futures pricing remain persistently above the $100bl level and last week closed above the 2014, $107bl high.
The retest of the 6960 (6930 low) is complete with the index closing some 145 points from the low. With the strong buying reaction at this lower level, the potential for the Index to recover the 7200 level remains, this would also put the Index above the long term trendline. A closing price below the 6960 level this week would be a very bearish signal for the weeks ahead. The Technical Up trend remains in place until a lower high followed by a lower low is registered.
Relative Strength has again closed below the key 50 level. Price momentum remains negative. Only a further swing above the 50 level would signify positive momentum.
Comments from last week: As discussed last week, a solid sell down has occurred with an expanding range, the closing level meeting the confluence of the longer term Trendline and the key support level of 7200. The 7200 level has remained a key support level over the past 12 months. The next support level is shown at 6960 points. From August 2021 and December 2021 and recently during April 2022 the market has set 3 significant high points with a reversal underway as part of this broadening top formation.
Last Friday set a pipe reversal from the Fake out low (false break lower) on Thursday, this is a very bullish short-term setup with the short sellers trapped having to cover. An initial retest of the 7216 support / resistance level is expected. The Daily remains within a down trend however this short term support level indicates the Index value may trade within a range established over the past 12 months.
The Relative Strength Indicator (14) reflecting the underlying price momentum has moved higher from below the 30-level indicating a shift to positive momentum. A move over the 50 level would be a strong positive for buyers.
Trading volumes have not matched the indicated bullish reversal of last Friday. Strong volumes over 1Bil on a Daily basis would indicate strong buying/selling.
Comments from last week: The Daily chart highlights how “Technical” the market has become as resistance levels (7437 ) and support levels (7216) have influenced price movement. Further breakdown of price has the potential to test the 6960-support level set during February – March period this year. With the current movement setting a Daily downtrend in place, a continued move lower would put the higher time frame Weekly chart into a corrective move.
Last week the S&P 500 set a Gap open buy “signal” where the price Gaps down on the open. The early week decline has been overcome towards the close of the week with late buying forcing the price higher, setting a “hammer” bar to close. Following the recent decline, the “Hammer” bar is often a precursor to an important reversal and further price gains. This does not reverse Primary trends but offers short term trading opportunities to the long side.
Price movements are considered positive with a reading above the 50 level, with this continued reading turning below the key 50 level indications that price momentum is slowing, an ongoing reading below 50 would confirm the continuing Bearish price movement in the price chart. The potential for an accelerated move lower remains as the momentum slows and moves lower towards the 30 level.
Comments from last week: The S&P approaches a 12 month low as the 4050 level is again tested as support, the test and immediate rejection of the 4320 level mid-week is a significant bearish signal for further declines. The S&P 500 has entered a Primary down trend; however Downtrends are also made up of price retracements, during any potential price retracement this week the first resistance level is 4200, this level should be monitored for a close over this level as a signal of a further advance.
Within the Daily time frame the final 3 bars set up a 3 Bar reversal pattern often found following long declines. More importantly the price has closed above the key support level of 3940. A short term price rally would be expected in the coming days, however many levels of resistance remain ahead for any forthcoming price rally. The first resistance remains at 4114.
Relative Strength Indicator (14) has made a higher reading to close the week but remaining below the key 50 level. No divergence signal has been in play, so a move towards the 50 level is required to show improving price momentum.
Comments from last week: The 4310 level has been tested twice with the current rejection decline setting a higher low on Friday’s close against the “Hammer” bar of last Monday. This second Hammer bar is a further bullish signal the closing price support remains at this 4144 level. See RSI notes, a higher low for the week may lead to a short price rally to retest the 4310 level. Any Daily close below the 4114 level would send a bearish signal and potentially test lower levels.
The trendline has been lowered to reflect the new swing point, this line is “tentative” with 2 touches. This daily chart of the Nasdaq has also set a 3 bar reversal following the recent decline making a 12 month low. This is not a trend reversal signal as the Primary trend remains down. The expectation would be for a short term rally to test the resistance level of 13542.
Relative Strength has moved sharply higher during the week but remaining below the key 50 level, indicating improving positive price momentum from the 14 day look back period.
Comments from last week: The current Trendline breakdown has not been met with directional selling, rather a consolidation area has developed, the closing low on Friday although the low of the week is a short 142 points lower than the previous week. See RSI note.
While technical support levels are being tested lower the strong observation is the short duration at each level in most cases 24 – 48 hours before a breakdown lower to the next level. The break of the long term trendline is concerning for the short-term buyers. Gold remains within a Primary Down Trend, the last close above the psychological level of $1800 is an important observation, a further close above the OPd high circa $1860 is critical before a low can be declared. The lower support levels of $1780 and $1764.30 remain in play on further weakness should Gold move to close below the $1798.0 level on an intraday basis.
Price momentum has turned lower, the indicator continuing to move below the 50 level and 30 level will be the critical observation again this week as a signal of decreasing price momentum that may continue to move further lower below the 30 level.
Comments from last week: From the first rejection of the $1916.40 level, it is important to note the strong sell down last Monday did not follow through to close lower. For the past 4 trading days Gold has set a secondary market consolidation again retesting the 1916.40 level with an important end of week close above the $1876.90 level. Price failing to find support at this level may see a further decline to test the Weekly trendline.
Six straight days of lower highs and lower lows indicate persistent selling as support levels are disregarded, importantly the $21.60 level provided support before the further decline last Thursday. Silver has made declines of this magnitude in the past followed by significant rallies, a valid reversal signal is required but not yet showing. It is concerning that the current closing price is a 2-year low. The Primary Trend is DOWN.
Current Relative Strength is moving below the 30-level turning lower shows price momentum is very weak. The RSI may develop a Bullish divergence signal against declining price. A continuing move below the 30 level and lower would be very bearish in the short term, and the potential for a further decline remains should price consolidate below the $21.60 level.
Comments from last week: The continued sell down of Silver is viewed as a corrective movement, the lows of the past 5 trading days setting up a Bullish 3 point low consolidation pattern, (the 3rd point to be confirmed). Confirmation of this pattern should see an immediate rally to retest $23.50.
Consolidation between the resistance level of $2712.0 and $2600 support may be about to be breached lower as $USD Gold moves lower. Local producers may be subject to current market sentiment (bearish) pricing.
Relative Strength has turned lower below the 50 level and is moving towards the key 30 level indicating a decrease in momentum. Relative strength may continue to track lower as price has the potential to retest the $2477.0 level on a break below $2600.
Comments from last week: Potentially good support for the local producers as the XAU AUD puts in a pipe reversal during the week confirming support at $2600. The $2712 remains the resistance level in play.
The failed breakout at $4.90 has resulted in the current retest of long-term support at $4.00. Last week Copper set a “Gap open buy” signal, although yet to be confirmed with a higher weekly close. Copper remains within a long-term consolidation area with strong support at and above the $4.00 support level. A close below this level may see significant selling and the indication of a wide top in place.
Current reading has swung below the 50-level reflecting the current Primary move underway. The key now is for the RSI to move back above the 50 level as a reflection of ongoing and any positive underlying positive price momentum.
Comments from last week: Dr Copper, an indicator of Global growth and demand for goods has moved below the very important median level of $4.33. The current movement has the potential to retest the $4.00 level. Last week’s range has expanded from the previous week showing sellers in control.
The sharp rise in Volatility this week has been the highest in fourteen weeks.
Rising volatility above the 13 level equals bearish equities.
The cost of 3month forward PUT options is increasing.
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 observation to the underlying market.
Comments from last week: The XVI value is expected to rise this week as forward protective risk is again priced in.
A continuing Uptrend, the strong expanding range breakout above the March 2014 high at 104 is significant. In the short term a retest of 104 may take place and should be monitored for support.
The 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 70 level should move higher, a further reading above the 70 level would indicate very strong positive price momentum. The chart should now be monitored for a Bearish divergence signal should the RSI move below the 70 level on higher prices.
Comments from last week: The USD Index value has moved to a 10 year high, an expectation of consolidation between 103 and 104 before a move higher. The USD Index remains in a well-defined Primary UP trend that should see support remain at 103 to maintain a bullish view. A close below this level would indicate a short-term top in place.
The close above the $107.73 level is an important event for the Oil bulls. This will be the level in play this week, continued closes over this level will set up a very bullish outlook for closes over the $116.60 level to confirm the current Primary UP trend. The ultimate key level to hold is $94.0. A close below this level would see substantial selling back to the $80 level.
The current price reversal has produced a second higher low in the RSI, the Indicator remains above the key 50 level, a signal of positive price momentum. This will again be monitored for a swing below this key level. The Relative Strength crossing and remaining below the 50 level is regarded as a Bearish indicator.
Comments from last week: Solid consolidation above the $94.00 level sets up Oil to retest the highs over $116.60 resistance following this week’s closing price over $107.73. The WTI contract remains within a Primary UP trend.
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