Did the markets just go over the tipping point? All US indices closed at the low of the month and have entered a technical down trend.
Basic DOW Theory infers markets are forward looking at the economy and potential for companies to show profits or not is now being priced in.
Relative Strength remains technically weak with consistent readings below the key 50 level.
With May being a seasonally weak period, several major lower support levels are now in play.
The low close of the Australian futures at 7315 points last Saturday morning suggests a weak open today.
Precious metals are being sold down in a general risk off event sweeping the markets.
Gold and Silver also failed to rally for the current price base with Silver failing below the $23.00 level, along with Gold retesting historical resistance levels and trading lower into the close and below the key psychological level of $1900.0.
The Fake Out bar of 2 weeks ago has followed thru with last week’s retest towards the 7200-level last week. The market has traded towards the long term trendline and looks set to trade lower with a break of the 7200-support resistance level being the first signal for a retest of 6900 points. The expectation is for this market, heavily weighted with 4 banks and several large resource stocks to trade lower in the coming week but remain within the past 15 month consolidation range between 6820 and 7530 points.
The underlying Primary Trend remains UP.
Relative Strength continues to close over the key 50 level. Price momentum remains positive but slowing as the indicator rolls lower this is now being monitored for a further downturn should prices consolidate further below 7530 points. As the Relative Strength Indicator reflects price momentum the current weekly closing price displays slowing price momentum.
Comments from last week: The “Fake out” bar breaking a previous high and finding immediate selling is a strong rejection signal as late buyers are trapped at higher prices along with those taking profit from the previous advance. This now sets up the retest of 7200 points as the first support level of interest.
Late last week the strong recovery from the initial retest of the 7200 level has closed at the high but also closed below the 7437-resistance level. The market is expected to trade lower on open this week, so key levels of support should be monitored to gauge market sentiment. The first is 7216, a close below this level would send a very bearish signal to investors and may invoke a momentum move lower into the 6900 level.
The Relative Strength Indicator (14) reflecting the underlying price momentum has moved higher from below the 50-level indicating a shift to positive momentum. As the Relative Strength is moving over the key 50 level, a further cross below this level indicates further bearish price momentum.
Trading volumes have remained buoyant and have been increasing during the past week leading to last Friday’s high volume close, volume will be monitored for any further increase as a signal of “risk off” taking the market lower. Strong volumes over 1Bil on a Daily basis would indicate strong buying/selling.
Comments from last week: The Daily XJO has set a Fake Out (FO) reversal pattern similar to the Mid February 2022 reversal, follow through lower should be expected. The month of May is seasonally weak, it seems the market has moved in anticipation of the period of the year. Initial support is shown at 7437, with 7370 as earlier closing price support shown during the October, November and December period of 2021.
The lowest close for the past 12 months. The S&P 500 has entered a technical down trend. Last week’s close at the low, indicates a lack of buyers at the close, this technical low close can lead to further selling as profits are protected and late buyers (12 months) are left taking stop losses. Basic DOW Theory infers markets are forward looking at the economy and potential for companies to show profits or not is now being priced in.
Price movements are considered positive with a reading above the 50 level, with this continued reading turning sideways and moving 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 further below the 50 level.
Comments from last week: The Outside Period down close (OPd) shows the market initially traded higher with late buyers, however the low close has trapped the buyers into losses. The real test of support will come at the 4200 level. The recent corrective movement higher has failed, the follow-on rejection from the shooting star high point can be swift and deep. A solid close below the 4200 level would put the S&P 500 at a 12-month low, this would shake the resolve of the Bulls with further selling taking place.
Short day rallies are immediately being sold into; It is important to notice the range – high to low – is increasing on the down close days, this brings into focus the current selling pressure. The breakdown from the long term trendline was retested during the week with immediate rejection to retest the FO low point from late February 2022.
Relative Strength Indicator (14) has again moved lower remaining below the key 50 level. A continued lower close below the 50 level would alert traders to further decreasing price momentum and potential price breakdown too and below the lower 4200 level.
Comments from last week: The daily chart gave the OPd sell warning last Thursday with the close below 4420, the 2nd impulsive move to see Friday close below the long term trendline, this sets in place the potential retest of 4220 points (Weekly level).
The Nasdaq displays the same rejection pressure as the long term trendline is broken and retested with the immediate reaction to trade lower. The Nasdaq has entered into a technical Primary down trend with further support levels at 12200 with the 10,000 point level as the current target point.
Indicator: Relative Strength 14
Relative Strength has turned further lower remaining below the key 50 level, indicating further bearish price momentum from the 14 day look back period.
Comments from last week: The Nasdaq reaches the point of trendline failure (see comments from last week). A break down from these levels at the trendline and the 13,243-support level risks a free fall to lower levels. These declines can be long and persistent, as the high point was set during November 2021, the continuing move lower will test the buyers resolve as this Primary down trend persists.
Precious metals being sold down in a general risk off event sweeping the markets. The past week again saw the $1916.40 level tested and rejected again. A price movement lower than $1876.90 will place Gold into a primary down trend. $USD Gold has the potential to retest the February 2022 breakout level shown at $1834.0 on further loss of momentum.
Price momentum has rolled sideways, the indicator continuing to move below the 50 level will be the critical observation this week as a signal of decreasing price momentum that may continue to move lower below the 50 level towards the 30 level.
Comments from last week: Daily Gold setting a FO (Fake Out) reversal followed by the impulsive movement follow through puts the major support level as the prime target. A break below this level would give the market a very bearish signal with the potential to break below the psychological level of $1900 and retest the $1876.90 level. A solid close over the $1966.0 level is required to give this chart a Bullish setup.
A persistent sell down of Silver keeps the Bear market intact. What’s to notice about the right-hand edge of this chart is the inability of price to close higher on a daily basis. The breakdown of the $23.50 was briefly retested in the same session as the market closed on the lows towards $22.50 (target) The current OPd may indicate an ultimate swing point however further price consolidation is required above the closing low of $22.78 to initiate a bullish signal.
Current Relative Strength is moving below the 50 level and now below the 30 level turning lower shows price momentum is decreasing in this retest of the $22.50 area. A continuing move below the 30 level and higher would be very bearish in the short term, and the potential for a further decline remains as price consolidates at the $22.50 level.
Comments from last week: The price testing the April low point at 3, put the Seller in a strong position to retest the $23.50 level as this corrective move ends any bullish setups. The chart also displays 3 low points shown, this is also a great bullish signal if the current point 3 holds support above $24.0 in the coming days.
Further consolidation in the AUDXAU price as the $AUD weakens along with the declining $USD Gold price. A break above the $2712 level would be a bullish signal for the local producers share price. The AUDXAU Gold price remains within a Primary UP trend, although consolidation periods can be extended the underlying support remains.
Relative Strength has turned higher above the 50 level and moving towards the key 70 level indicating an increase in momentum. Relative Strength may continue to track higher as price retests the 2712.0 level.
Comments from last week: The $AUD gold price again enters a consolidation phase between $2712 and support of 2600. The current decline in the $AUD may see the upper level again retested. However, both the $USD Gold price moving higher with the $AUD remaining weak the potential for a move higher remains.
Copper being sold down with the general risk of trade underway is not a positive signal of Global growth. Copper moving below the key $4.5lb level and closing towards the “midpoint” $4.33 level is a bearish signal for further declines. Copper remains within a large consolidation zone. A close above the $4.50 and $4.80 level is required to set a Bullish move underway.
Current reading has swung sideways and below the 50-level reflecting the current consolidation move underway. The key for now is the RSI to move above the 50 level as a reflection of ongoing and any positive underlying positive price momentum.
Comments from last week: The current Outside Period down close (OPd) rejection bar confirms the $4.80 level as resistance. The potential for further range trading between $4.50 and $4.80 remains. Copper historically trades within price ranges, the current set up is not a bullish consolidation.
The XVI value is expected to rise this week as forward protective risk is again priced in.
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: 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 again underscores the reversal signals in the Major Indices, forward protection is now being priced in by the Options market. Only a further increase in the XVI this week would provide a Bearish undertone for markets as future risk coverage is taken.
With the 103 target being met this past week; the current retracement has closed above this level to finish the week, a bullish signal during a consolidation. This move underway places pressure on the $AUD and ultimately improves the $AUD Gold price.
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 50 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.
Comments from last week: A solid Bull run underway as levels of resistance are discarded with solid moves higher. The march 2020 high at 103 remains the current target. This move underway places pressure on the $AUD and ultimately improves the $AUD Gold price.
Last week I commented about the potential for the WTI price to retest the $94.0 level. Although the price traded toward this level the current high close back above the $100 level remains a bullish signal for Oil in the week ahead. The $94.0 level remains the key level to hold as the current price consolidation takes place. A closing price over the $107.73 level would be a very bullish signal for further gains.
The current price reversal has produced a higher low in the RSI, but the indicator remains above the key 50 level, a signal of price momentum, remaining positive. 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: The high of 7 weeks ago has not been broken, followed by the up-close bar of 5 weeks ago being the failed retest of the high, the developing resistance level is $107.73. As price consolidates below this level this sets up a potential move below the $94.0 support back to the current trendline.
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