Good technical signals of a relief rally beginning.
Relative Strength divergences in the S&P 500 with key reversal patterns showing and movements underway for higher prices.
Bull markets do not start within a week, but these types of reversals offer many trading opportunities for the short term.
Oil remains in a Bull market with last week’s retest towards the long term trend line.
Still with the potential $130 blow off high as the current target.
Gold and Silver remain within the long term trading range; however some early Bullish action may see the metals trade higher.
Momentum to the downside has slowed with last week’s inside range. The range low to high is short and has no real meaning. Meaningful price bases take time to build to give buyers confidence to hold. The underlying Primary trend remains down. Price failure at this level may retest the 6200 level discussed last week. Look for a close above 6640 to maintain a bullish view.
Relative Strength has closed above the lower 30 level (just). Overall price momentum remains negative. Relative Strength should now be monitored for a Bullish divergence signal.
Comments from last week: The strong impulsive move last week has the potential to test the 6200 points support area. The XJO is now in a Bear market trend as last week’s range extends lower than the previous lows set during 2021. While the Index has broken down through several support levels, these levels should be monitored for resistance when the market attempts a short term rally.
The 3 bar reversal developed early in the trading week last week and has developed further to close the week on the high. The Daily level of 6600 is the first key level to hold this week. This type of relief rally has the ability to move higher ultimately testing the important 6930 level as resistance. A price breakdown below 6500 would be a strong negative for further gains.
The Relative Strength Indicator (14) reflecting the underlying price momentum has moved higher from below the 30-level indicating a shifting to more positive momentum. A continuing move above the 30 level would be a positive indicating further gains in the underlying Index. However this is the area to monitor for a Bullish divergence signal.
Rising trading volumes are required to confirm the upward bias of the Index. These are not present in the past 5 trading days. Only strong volumes over 1Bil on a Daily basis would indicate strong new money buying.
Comments from last week: The strong decline can be seen in the Daily chart from the large decline set last Tuesday. Prices are a reflection of market participation and the Market price for future economic events. With the Relative Strength extended below the 30 level, the potential for a short rally is in play. The potential for a close above 6600 remains, however, should be regarded as a Bear Market rally.
A key Pivot point reversal is now displayed in the S&P 500 also filling the Gap open left 2 weeks ago, this is a very bullish signal for further gains. With a lot of overhead resistance, firstly at 4050 the Index may consolidate further at this level to confirm the sellers are finished. The underlying Primary trend remains down.
Relative Strength has shown a Bullish divergence signal with last week setting the 2nd Pivot point low. This type of divergence signal is a good indicator for further price gains.
Comments from last week: With the Index closing below 3715 towards the 3600 level, traders would look for support at these levels. The Weekly chart is within a well defined Bear market Down trend. Last week opened with a Gap, (Gap open buy signal) resulting in trading this week that may cover that Gap as the chart has the potential retest high to the 4050 level.
The daily S&P500 shows a pivot point at the low followed by the gap up open. With last Friday gaping further higher an Island base is now in place, this again is a very bullish signal for further gains. Last Friday’s price movement is an expanded range compared to the range in the early part of the week. A very bullish signal in the short term. A daily close below 3800 would give a very strong signal the seller has returned.
The Daily Relative Strength has also developed a bullish divergence signal followed by a sharp upturn. Although still remaining below the key 50 level.
Comments from last week: Following the Gap open for the Week, the S&P 500 Daily chart shows the open close within the trading range becoming narrower, indicating “balance” coming as sellers are losing control. Momentum to the downside is slowing. Any price movements higher would be considered a Bear Market rally. Relative Strength Indicator (14) has made an equal reading to close the week below the key 30 level. Bullish divergence may be developing and should be monitored for a move above the 30 level as an indicator derived Buy signal.
An early week 3 bar BUY signal also developed in the Nasdaq. Price has moved above the old long term trendline. (this will be moved next week) Both the Weekly and this Daily time frame remain in a down trend, but this pattern is a strong signal of a base developing over the coming weeks. A close below 11,500 would be a strong signal the Buyers have left and would have potential to continue the down trend.
The minor divergence signal discussed last week has played out with the indicator moving to the important 50 level on a sharp move higher. With a continuing move 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 close of the Week, the Nasdaq has set a 3 Bar reversal pattern, with the potential to trade higher towards the 12573 level. The mixture of Daily up closes against the down close days shows the Nasdaq coming into balance as sellers lose control. The Nasdaq remains within a well defined Bear market structure, any price rally may be short and sharp as Buyers attempt to enter the market. Relative Strength has moved higher during the week setting up a small divergence signal. This is not an Ideal signal being above the 30 level, however the Nasdaq historically responds to this type of signal.
Gold remains within a strong consolidation zone, and may remain tradeable on shorter time frames, this Daily continues to consolidate below the key $1876.90 level as a strong signal no new buying is taking place. This week look for the $1834.0 level to hold as a weak bullish signal.
Price momentum is working higher, the Relative Strength Indicator turning higher above the 50 level is the critical observation again this week as a signal of increasing price momentum that may continue to move further higher. Price consolidation would naturally see the RSI drift around the 50 level. A strong movement either way will show the next directional move.
Comments from last week: Rejection again at the $1876.90 level saw Gold again retest the Long term trendline, the immediate price rally above the $1834.0 level is a positive, with last Friday’s price action again retesting this level. Last week failed to follow through from the OPu of two weeks ago, again leaving Gold trading within a well-defined trading range of many months.
The daily chart of Silver also shows a lack of buying interest with further consolidation below the $22.50 level. Silver may be tradeable on shorter time frames. Whereas the Daily gives no formal direction other than the potential for further consolidation. It is important to note that the support levels are holding, so a break either way from this consolidation area may give a very directional move.
Current Relative Strength is moving higher but remains below the 50-level, RSI turning higher shows price momentum is improving. A continuing move below the 50 level and lower would be very bearish in the short term, and the potential for a further move higher remains should price close above the $22.0 level.
Comments from last week: From the strong sell down last Monday, shows no follow through lower, Silver has recovered price back towards the key $22.50 level. Although Silver remains within a well defined trading range, price momentum is changing to the positive. (See RSI note)
As the $AUD remains below the key $0.70 cent level and USD Gold consolidates the AUD Gold price may also consolidate further. This will be a difficult signal to trade the local miners, but the chart should be monitored for a breakout higher or lower.
Relative Strength has turned sideways above the 50 level and is moving towards the key 70 level indicating an increase in momentum. Relative Strength may continue to track higher as price has the potential to retest the $2712.0 resistance level.
Comments from last week: With $AUD weakness and USD Gold stabilising, the $AUD Gold price is developing a strong momentum move higher from the Bullish flag pattern developing last week. $2712.0 remains the key resistance level in the current price structure. Local Gold producers may find the buyers this week on improving market structure.
The price of Copper has broken a very important support level at $4.00 to test the $3.80 level mentioned last week. This is a VERY important development for a view on the Global manufacturing outlook. Copper is used in most building and manufacturing processes along with automotive applications. This is a VERY bearish development and the Copper chart needs to close back above the key $4.00 level to give confidence to manufacturers.
Current reading has swung from above the 50-level to move lower, below this important divider between negative momentum and positive momentum reflecting the current reversal move underway. The key now is for the RSI to swing back above the 50 level as a reflection of ongoing and any positive underlying positive price momentum at this important support level.
Comments from last week: The “Bear Flag” development below the $4.50 level has played out with Copper again retesting the $4.0 level. The price movement last week is impulsive (strong range high to low) following the Gap open. A break of the $4.0 level would show the sellers in control with the $3.80 level as next support.
The significant decrease in volatility has reflected in the early rise in equities.
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.
Comments from last week: The XVI value is expected to rise this week as forward protective risk is again priced in.
The continuation pennant in the USD Index, suggests a breakout higher with the underlying Primary trend in the background. A break of the Pennant lower would indicate a retest of the long term trendline underway. This will not change the underlying Primary trend, should support be found circa 103 level.
The Relative Strength has turned sideways in line with price movements and should now be monitored for further momentum strength as the current reading above the key 50 level should move higher, a further reading above the 50 level into the 70 level would indicate strong price momentum.
Comments from last week: The USD Index has retested lower during the past week, however Friday’s price rally back above the 104 is a further bullish development. Consolidation could be expected to develop below the 105 level and above 104.
The divergence signal referred to last week has played out further to the down side with a retest of the long term trendline. The final close on Friday sets a new “hammer bar”, a further close over the $107.73 level would be an important development for the Bulls.
Relative Strength is developing a divergence signal as price makes a new high without the Relative Strength making a new momentum high. The sell signal will be developed should the RSI line cross down below the internal low (red) line currently inplay.
Comments from last week: The WTI contract price has developed momentum divergence confirmed with the OP (outside period) reversal on Friday to retest the important $107.73 support resistance level. The risk remains for a retest of the recent highs and a further blow off top to $130.0 as the contract price remains with a Primary UP trend. In the short term current price movement has the potential to retest the long term trendline circa $100.0.
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