The tipping point arrives, the reality of Inflation without wage growth and the US Federal reserve suggests the first interest rate hike will be a full 0.5%, has sent the markets into risk off.
Inflation cycles offer some great trading opportunities both long and short in the Commodities stocks and Futures markets.
The CRB commodities index, while closing at an all-time high last week, reversed dramatically as US and European Indices continue to set new lows with concerns around inflation and Global growth weigh on risk as the US10 year yields reach 2.98%.
This will bring selling pressure onto Australian miners BHP, FMG, OZL.
Gold and Silver have fallen back into the 12-month consolidation range.
Also, in the commodities space, the WTI Oil contract remains over the key $100 level, current price action may see a retest of the $94.0 level
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. The underlying Primary trend remains UP.
Relative Strength continues to close over the key 50 level. Price momentum remains positive, this will now be 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: A second week of consolidation under the 7530 level and 107 + points short of an all-time high. Look for a further close over this important level as a very bullish signal for further gains. Although the Index has remained within a large consolidation zone for the past 12 months, the recent retest of the trendline has set up the market for a bullish run from the strong close over the 7200 level. Continued rejection at this level would be a very bearish signal should the index value fall and close below the week’s low point at 7420.
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 Relative Strength Indicator (14) reflecting the underlying price momentum has moved lower from the 70-level indicating a shift to slowing momentum. The Daily chart remains in a divergence sell. The Relative Strength is moving sharply towards the key 50 level, a cross below this level indicates bearish price momentum.
Trading volumes 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: Last Wednesday’s FO (Fake out) low below the 7437 level has set up the strong move for the current strong close shown on Friday. With the Index having a strong commodities weighting a further higher close would be expected in this seasonally bullish period. The Daily chart should be monitored for an early price rejection pattern. Rejection patterns are the 3 Bar reversal or bearish pivot point or the OP outside period or simply rejection of the recent 7573 high. (FO)
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.
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 Bearish rejection bar setup in the price chart. The potential for an accelerated move lower remains as the momentum slows and moves below the 50 level.
Comments from last week: The shooting star pivot point from 2 weeks ago has played out lower from the very important 4545 resistance level. This now sets the stage to trade lower with the first level of support shown at 4320 points. The ultimate support level is shown at 4200 points a close below this level would set a significant top pattern in place and set the market into a primary down trend. The potential for an accelerated move lower remains as the momentum slows and moves below the 50 level.
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).
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 intimate rejection at 4520 resulted in the Gap down last Tuesday with consolidation around the 4420 level. With price moving to “retest” the trendline at around 4300 level, the chart shows 2 OPds ( outside period with down close) as buyers taking the market higher were overwhelmed by selling. With last Friday closing at the low the momentum move will be a lower print in the coming week. A continued lower close below the 50 level would alert traders to further decreasing price momentum and potential price breakdown too and below the 4300 level.
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.
Relative Strength has turned further lower remaining below the key 50 level, changing to bearish price momentum from the 14 day look back period.
Comments from last week: The Nasdaq has set the lowest close for the past 21 trading periods, the OPd in place set a very bearish tone. Look for a retest of the “trendline” area at 13500 points. The corrective movement shown during the month of March has proven to be a Bear market rally as the lows are again tested. A close over the 14076 level would set a reversal signal.
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.
Price momentum has rolled lower, the indicator continuing to move below the 50 level will be the critical observation this week as a signal of decreasing price momentum this may continue to move lower below the 50 level towards the 30 level.
Comments from last week: From the notes last week, a strong close over the $1966.80 level would give a Bullish signal. Last Friday saw a retest of this level with a close of $1974.0 and towards the high of the range setting a further Bullish signal for a move higher. At best further consolidation above this level this week would add to the bullish view. A closing price below this level would put the PM on a trek to retest the $1916.40 level.
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.
Current Relative Strength is moving below the 50 level and now turning lower shows price momentum is decreasing in this retest of the $24.00 area. A continuing move below the 50 level and higher would be very bearish in the short term, and the potential for a further decline remains as price consolidates at the $24.00 level.
Comments from last week: Current price range from $25.40 to 25.80 is critical to hold this week, the high range close on Friday suggests a further breakout higher. Last Thursday’s OPd may set the market for further consolidation, so a close over the high of this bar would be very bullish.
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.
Relative Strength has turned higher above the 50 level and moved towards the key 70 level. Relative strength may continue to track higher as price retests the 2712.0 level.
Comments from last week: With the strengthening $USD Gold price and weakening $AUD the AUDXAU price has rallied strongly towards the resistance level of 2712.0. This provides a good signal for local GOLD producers.
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. A close above the $4.80 is required to set a Bullish move underway.
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: Another week of consolidation (6 and counting) in the Copper chart. These periods of low volatility often break out into high volatility moves. The expectation is for a breakout above the $4.80 level as a signal buyers are in control.
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.
A solid Bull runs 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.
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: The OPu may signal a high is in place, statistics indicate a 94% chance. With that in mind further consolidation below the 100.5 level would be bullish for further gains. The 91.42 level remains the key support area during a consolidation phase.
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.
The current price reversal has produced a new low in the RSI, but the indicator remains above the key 50 level. 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 $94.00 has confirmed as a major support level as the WTI contract sets an OPu, a statistically strong indicator of a turning point at these levels. With the high close towards the $112.00 level further gains would be expected this week.
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