The Question facing every trader, is there a bear market rally underway?
When looking at the Weekly charts of the Indices, evidence is weighing towards a Bear Market rally scenario. The outcome will be markets making further lows in the coming weeks.
In the short term the only real game changer for Global markets is a resolution to the Russian – Ukraine war.
Copper is finding few buyers as the price continues lower towards the $3.0 level, only improving news from China can arrest the current decline.
Gold has set a new low within the long-established down trend; however, Sliver continues to set a supportive reversal pattern, and may see further gains in the coming week.
The WTI Oil contract remains above the key USD $94bl support level (just) with further consolidation a high potential outcome. The sell signal has developed now that the RSI line has crossed down below the internal low (red) line currently in-play.
The concern is the past 5 weeks of price action have developed into a Bear Flag formation. This will be confirmed should a breakdown below the 6400 level be the recent low set on the 20th of June 2022. A break of this level would also show a breakdown of the current “tentative” trendline. The Market closed towards the high of the week, only a further strong advance would negate the above scenario and lead to a retest of 6930 now the key level to cross this week.
Relative Strength has closed above the 30 level. Overall price momentum remains on the negative side of 50. However as Relative Strength continues to move towards the key 50 level a sign of improving price momentum is emerging.
Comments from last week: The underlying Primary trend remains down. Current price structure continues as a Bearish secondary consolidation. A further close above the 6640 would set the stage for an important retest of 6930. As the Index is heavily weighted with the Financial sector and large commodities stocks a rally in the XJO top twenty is required.
A good technical breakout above the 6765 level last Thursday with Friday “retesting” this important Resistance / Support level. This is the point of support for Buyers to hold in the coming days. With the Weekly chart displaying a Bearish Flag pattern an early breakdown will be evident in the Daily chart with a close below the 6600 level.
The Relative Strength Indicator (14) reflecting the underlying price momentum has moved higher above the 50 level from below the 50-level indicating the continued change to positive momentum. A continuing move above the 50 level would be a very positive indication for further gains in the underlying Index.
Last Friday’s higher volume bar is an encouraging signal to indicate new buyers are entering the market. Rising trading volumes are required to confirm the upward bias of the Index. Again these are not really present in the past 5 trading days.
Only strong volumes over 1 Bil on a Daily basis would indicate strong new money buying.
Comments from last week: The Daily chart of the XJO displays a developing “pennant” pattern. This is a continuation pattern against the prevailing down trend. To negate this view, a close above the June high of 6765 is required to show buyers in control. The high in the range close on Friday may follow through to a higher open today (Monday) however the 6575 resistance level is required to be cleared before this can be called a bullish move.
Last week I referenced the 3715 level as support, the current follow through has set another bullish pivot point. This Index has traded towards the 4050 level with some late week rejection, not a good signal for further gains. But the 4050 level and the 3715 level are good reference points to establish a “view” of future price action. A close above 4050 would confirm the current base pattern, however a close below the 3715 level would indicate the sellers have control of the market direction with risk continuing to the downside inline with the primary trend.
Relative Strength has shown a Bullish divergence signal 3 weeks ago, setting the 2nd Pivot point low. The “Buy Line” shown has not been crossed and this indicator of improving positive price momentum should show the reading close over this level to give a solid buy signal on momentum. Overall, this type of divergence signal is a good indicator for further price gains.
Comments from last week: The S & P 500 is building support above the 3715 level, the high close in the range last week is a bullish signal for further gains with the potential retest of 4050 an important development. The Primary trend remains down. Price failure below the 3715 level would be very bearish in the coming weeks.
Daily support / resistance is shown at 3940, this level was tested during last Friday’s session. The short-term outlook is for this level to hold, a close below this level would alert traders to the potential of further falls to refill the “Gap” showing at the 3800 point level. Continued closes above this level shows Buyers in control with a potential retest of 4114 consolidation area.
The Daily Relative Strength bullish divergence signal followed by a sharp up turn shows improving price momentum to the upside. RIS is now above the key 50 level, a further movement higher over of the 50 level would be a strong momentum buying signal.
Comments from last week: Last Thursday’s Fake Out (FO) low followed buy the Gap run on Friday sets up the Index for further short-term gains. The resistance level of 3940 remains the level to close over in the coming days. Further resistance at this level would set a very bearish signal in the short term, at best a developing range below this important level and above 3700 would begin to show a base building.
The Nasdaq 100 appears the strongest of the US Indices, however this week the first real resistance appeared at the 12573 level. The wide base starting from May 2022 has set up the current push higher. Last Friday’s reversal OPd (Outside Period down close) is a key reversal signal that will be resolved this week. With a solid close over the high, the next price target is shown at 13542. An early week close below 12175 would set up a bearish signal and potential retest of the Trendline.
The Indicator again moved over the important 50 level, but the late downturn is a concern for a continuation signal. 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: The higher low set Wednesday / Thursday last week is the 3rd low in this pattern and deems the pattern complete. The higher low compared with the S&P 500 fake out low confirms the short term bullish view of this index. The ascending pattern is now complete; a price break above the 12175 level would signal a strong bullish move underway. As the Nasdaq remains within a primary (Weekly) downtrend, the current daily pattern may show a base building for an extended rally.
Large price range low to high OPu marks the retest towards $1676.0 support. The current close over $1720 seems weak with the final bar closing “midrange”. Gold remains within the definition of a Primary down trend. A further retest of the $1676.0 could be expected should a close occur below the $1720 support / resistance level.
Price momentum is working higher and above the 30 level, the Relative strength indicator again turning higher is a reflection of the overall increase in price. The small UP turn shows the momentum strength. 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 down trend continues with resistance now established at $1720 following the decisive price movement below this level last Thursday. Last Friday’s inside range (IPd) indicates a slowing of directional momentum setting up interim support at $1700. A further breakdown below the $1700 level would show the sellers in control
Silver is setting a daily secondary consolidation pattern above the $18.40 level. A further close above $19.50 would confirm the base. This type of base is weak and subject to a further close below the $18.40, this level would set a very bearish signal for lower prices in the coming days.
Current Relative Strength is moving lower and remains above and below the 30-level, RSI turning lower reflects the underlying momentum. A continuing move below the 30 level and lower would be very bearish in the short term, and the potential for a further move higher remains only should price close above the $19.50 level.
Comments from last week: The high close last Friday indicates a potential “short cover” underway, a close over the high of the day would indicate further buying and confirm $18.40 as key support. Silver remains in a Primary Downtrend without indication of a reversal base.
The bullish pivot point reversal set last Friday is based on the USD Gold price putting in a small rally higher. With some stability in the $AUD the AUD XAU price has moved in unison with the USD XAU price. Some recovery in the Australian producers could be expected this week.
Relative Strength has turned sideways below the 50 level and moved below the 30 level indicating a decrease in upward momentum. The small “cross back” over 30 is encouraging for an increase in positive price momentum. Relative strength may continue to track higher as price has the potential to retest the $2537.0 resistance level.
Comments from Last week: The current decline in $USD Gold has reflected in the $AUD Gold price moving below key support of $2537. Within this large consolidation the $AUD Gold price has entered into a Daily downtrend with the next support level shown at $2477. This will again place selling pressure on local Gold producers listed on the ASX.
Price structure: Primary DOWNTREND
Support at $3.20 is now in play with the Inside period set this week, showing the market in balance at this current level. The inside period offers a strong trading signal should the price break the high or low. Given the current weak momentum the potential remains for a retest of the $2.98 – 3.0 level.
Current reading has swung from below the 30-level as downward momentum has slowed. The key now is for the RSI to swing back above and remain above the 30 level as a reflection of ongoing and any positive underlying positive price momentum at this important support level.
Comments from last week: This chart is the most concerning when it comes to how this bear market will play out. Copper is undergoing a concerted sell with no respect for support levels as price moves lower. The high of last week retesting the $3.47 level as resistance. Last week set a “gap open buy” signal, a close over the $3.47 is required to confirm this signal. The next key level of support is the $2.98 – $3.0 level, this would set a 2-year low and retest of the initial breakout level.
The small decrease in volatility has reflected in the late rally in Australian equities. For continued support of equities, the XVI should move below the “13” level. Last week the 3 months forward PUT option insurance has decreased, suggesting a more risk on approach. While the reading remains above the key “13” level as a bearish indicator further declines in equities could 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.
Price resistance is developing below the 107.40 level. Last Friday’s OPu is a strong signal for a turning point. Only a close above the 107.40 level would confirm this view. The underlying Primary trend remains UP.
The Relative Strength has turned lower in line with price movements and should now be monitored for further momentum weakness as the current reading above the key 50 level 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 DXY has set a key reversal pattern with the Pivot point now in place. This week a retest and hold of the 107.4 level would indicate the underlying strength of the $USD. The major support level of $105.80 remains to be tested should a close below the 107.40 level occur. The $USD Index remains within a major Primary UP trend. The Relative Strength has turned lower in line with price movements and should now be monitored for further momentum weakness as the current reading above the key 70 level will move lower to sideways as price declines.
The current consolidation below the $107.73 level with the low close last Friday suggests a further breakdown below the $94.0 level. Next support is shown at $84.25, the current breakdown of the trendline is a concern for the immediate bullish case for price, this level needs to be reclaimed in the short term.
Relative Strength has developed a divergence signal as price makes a new high without the Relative Strength making a new momentum high. The sell signal has developed now that the RSI line has crossed down below the internal low (red) line currently in-play. The strong move towards the 30 level is confirming weakening price momentum. During price consolidation periods the RSI naturally drifts towards the 50 level as price finds balance.
Comments from last week: The WTI contract continues to develop a trading range with $94.0 as support and $116.0 as resistance. Last week’s range shows a FO (Fake Out) has closed above the April 2022 lows and sets a bullish view in the week ahead. The longer-term price target of $130.0 remains in place. The underlying Primary trend remains UP. A close below the important $94.0 level would negate this bullish view with the potential retest of $84.25.
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