Major indices have met their nadir point of inflection, the price weakness last Friday has the chance to play out into an extended retracement lower. Potential central bank interest rate movements continue to impact sentiment towards equities.
Global political uncertainties may have finally impacted the recent price rally.
Gold and Silver have again lost bullish momentum and risk retesting July lows.
Rejection of higher prices following the channel breakout has been decisive with strong ranges high to low.
Support of 6930 has been cleared with an extended range week, low to high. The Index has moved higher 5 weeks in a row and is now considered an extended run. Expect some retracement to retest 6930 level. This remains a corrective price movement within a down trend.
Relative Strength has closed above the 50 level. Overall price momentum still remains on the positive side of 50. However, should Relative Strength continue to move higher over the key 50 level a sign of improving and positive price momentum is emerging.
Comments from last week: The Index is still working the “corrective” type of movement. A retest of the 6930 level would be ideal to produce a trending movement. The resistance level of 7200 remains the primary target in this current movement. The small range of last is suggesting hesitation by the buyers and may result in some consolidation at this level above 6930.
Last Friday’s new high set up a Fake out (FO) reversal signal. Consolidation and price reversal at this 7100 point level may lead to a retest of 6930 in the coming weeks. The current retracement is over 50% of the initial decline and brings the Index into the much larger consolidation area setup over the past 8 months.
The Relative Strength Indicator (14) reflecting the underlying price momentum has moved higher to the 70 level indicating strong positive momentum. A continuing move above the 70 level would be a very positive indication for further gains in the underlying Index. The Daily Relative strength is potentially setting up a divergence sell signal and may signal a retest of the 6930 level on this slowing momentum.
Last Friday’s lower volume bar is not an encouraging signal to indicate continuing new buyers are entering the market. Only strong volumes over 1Bil on a Daily basis would indicate strong new money buying.
Comments from last week: Impulsive movements are often the precursor for a continued movement, last Thursday’s strong movement with volume confirmation potentially indicates the final short cover by the bears as the market is flooded with buyers. The Daily view of the Index is within a clear uptrend that may continue as no reversal patterns are showing. A close over last Thursday’s high would confirm this observation.
With the index momentarily moving over the key 4300 level last week’s bar is shown as a FO+1, this early reversal bar has moved to back test the 4200. Price failure from this level would signal a top in place and potential move back to support at 4050 points.
Relative Strength has shown a Bullish divergence signal 4 weeks ago, setting the 2nd Pivot point low. The “Buy Line” shown has been crossed 3 weeks ago, as this indicator continues to show improving positive price momentum. The reading over the 50 level will offer a solid buy signal on momentum, last week the indicator turned lower indicating a change in momentum. A movement below the 50 level would be a short term bearish signal.
Comments from last week: Well here it is, a strong close over the 4200 level on an expanding range low to high bar. Buyers in control with the week closing on the high. However this brings the scenario where everyone is in profit, any decline from here may be sharp as these profits are protected. The complete price movement from the low remains “corrective” as no trending action is taking place. Not a great signal for continuation until a retracement takes place and offers the seller a window to take control.
S&P 500 DAILY
Price structure: Developing bullish structure.
The S&P daily chart shows the index value trading up to the 200 day moving average with immediate reaction lower. Current daily support is shown at 4177. Bullish reversal would be indicated with a closing price over the FO high this will be confirmed with a close over the 200 day moving average.
The Daily Relative Strength shows improving price momentum to the upside. RSI is now above the key 50 level and rolling higher again above the 70 level, a further movement lower below the 70 level would indicate the potential for a price breakdown lower in the short term.
Comments from last week: During the past week the S&P 500 staged a clear break over the 4177 level to reach the 200 day moving average, an important development. The historical 4310 resistance level looms large at this pivotal 200 day average pricing point. A clear signal of continuation will be evident with a close over the 200 day average.
Price rejection at the 13556 level highlighted with the OPu, the current rejection movement has crossed the short trendline with last Friday closing towards the low of the range. The Nasdaq remains in a “corrective” move higher; this current retracement may result in a limited pull back before another advance over the 13,556 level. The daily range remains small indicating limited interest in this decline, so far.
The indicator moving away from the 70 level is a signal of a loss of positive momentum. With a continuing move, the indicator must remain over the 50 level, price movement will remain positive and have the potential to develop into a new UP trend.
Comments from last week: Observations last week focused on the 13556 level. The Nasdaq has now reached this level on a solid high close last Friday. Continuation higher could be expected with the potential retest of the “GAP” opening above 14535, (a 1000 points higher). There is a lot of resistance to clear prior to that level, however that remains the technical target. In the daily time frame the Nasdaq is within an UP trend.
Gold had the best chance to make a substantial advance from the breakout of the downward channel 2 weeks ago. Instead price set an engulfing range and has moved lower back from the $1800 level into the channel. The low close of last Friday indicates a momentum movement underway that may continue lower. Gold remains within a Primary downtrend.
Price momentum is working lower with the RSI turning lower below the 50 level. (Price consolidation would naturally see the RSI drift back too around the 50 level. A strong movement either way will show the next directional move.)
Comments from last week: The continuing movement outside of the well-defined price channel of the past 6 months is a significant development for the underlying support for Gold. The “retest” of the $1779.20 level has held with the strong close last Friday a good setup for further gains to retest the $1834.0 level.
Current Relative Strength is rolling lower with the movement below the 50-level, RSI turning lower would reflect the underlying momentum turning negative. A continuing move below the 50 level and lower would be very bearish in the short term.
Relative Strength has turned sideways from above the 50 level, this shows an decrease in positive price momentum and remains a strong warning for further declines. Traders should again look for a cross of the 50 level as a warning for underlying price support to break down.
Comments from last week: A tough week for AUD XAU as the AUD$ rallied on the US employment number fallout. With USD$ gold looking bullish this may follow through into the AUD XAU only if the AUD$ remains stable at current levels or lower. This week a close over 2537 would be helpful for the local producers, however rejection remains a strong possibility for the coming week with price to retest the 2440 lows. The $AUD Gold price remains within a large consolidation area below the $2712 level with no evident trend.
The failure of price to move over the $3.80 indicates weak momentum and further consolidation following last Monday’s “gap down open”. Copper remains with a Primary down trend. Price moving lower to a new low from this level would indicate a very strong downtrend underway.
Current reading has swung from below the 30-level to read higher as downward momentum has slowed. The key now is for the RSI to swing back above the 50 level as a reflection of ongoing price gains. A sharp cross of the 50 level is required to offer a strong buy signal.
Comments from last week: Copper staging a “V” recovery to test $3.80. This is a good start to full recovery into the 2021 consolidation area above $4.00 and below $4.80. Last Friday the retest was completed on a short range low to high bar. Some consolidation below this level could be expected early this week.
Starting to look very bullish for Australian equities with the XVI falling back below the “13” level.
The small decrease in volatility has reflected in the late rally in Australian equities. The ultimate closing observation is for a lower reading week on week.
For continued support of equities, the XVI should move below the “13” level.
3 months forward PUT option insurance has decreased, suggesting a more risk on approach.
While the final reading remains above the key “13” level as a bearish indicator further declines in equities may be expected.
The cost of 3month 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 observation to the underlying market.
The US Dollar Index has staged strong primary movements low to high pushing higher from the pivot point, with an immediate break higher above 107.40 resistance. This is a very bullish move with the potential to retest the “shooting star” high at 110.0.
The Relative Strength has turned sharply higher in line with price movements and should now be monitored for further momentum strength or further consolidation as the current reading above the 50 level but below the 70 level. This will move lower to sideways should price decline further, only a continued reading above the 50 level would indicate continuing strong price momentum.
Comments from last week: The decline in the US inflation number has set the DXY sharply lower to show a completed pivot point last Friday and confirming the long term trendline. A close over the 105.80 level would give an indication of a retest of the 107.40 level underway. A breakdown below the long term trend line would offer a very bearish signal for further declines.
WTI remains within a secondary movement lower, the “overlapping” weekly price ranges suggest a measured move underway rather than a “committed sell” from traders. Last week’s retest of the $84.25 level reinforces this level as support. A breakdown below this level would indicate a major sentiment change. Further a close above the $94.0 would regain this level as support, current momentum does not suggest this will occur.
The sell signal continues now that the RSI line has crossed down below the internal low (red) line currently in-play and below the 50 level. The strong move towards and below the 30 level is confirming weakening price momentum.
Comments from last week: Last week’s inside bar can mark the point of balance in the market, the high test and rejection during mid week, at $94.0 is a bearish signal for further declines to retest the $84.25 level.
Source - database | Page ID - 21385