Black and White Technical Report: The Week Beginning 05/07/2021

Historically the US markets rise into July, the 4th holiday. The strong job numbers added to the Major Index’s push higher last week.


Markets are running on the high amount of dollar liquidity available, in the process many “traditional” short term technical reversal signals have failed.

Within the Australian space the XJO is ultimately targeted to 8000 points, this would require strong gains of 20% plus in the major components, ie, the Banks along with the larger industrials WES and CSL.

 

Gold and Silver both found strong support last week along with Oil meeting the targeted 2018 highs of $75.20, with the ultimate move to $100.

 

XJO WEEKLY    
Price structure:

The XJO registered an Inside range last week as the market remains in balance, so while the market has not made a new high it is important to acknowledge some important observations.

The 7197 level has held as support; the price is developing along what was a tentative trendline, now a confirmed trendline.

The short term price target of 7715 remains in play as price has not shown a real reversal signal in this consolidation area.

 

Indicator: Relative Strength 14
The RSI indicator has turned sideways but remains at the 70 level. A further reading under the 70 level would put traders on alert for some form of slowing divergence signal.

The RSI should be monitored for a potential move below the key level of 50 to show a shift in price momentum.

Black and White Technical Report: The Week Beginning 05/07/2021, FP Markets

Comments from last week:  The past week avoided a closing price below 7197 with only a retest of this important level taking place. The underlying market remains robust and highly tradeable with gains in the XFJ (financials) and XMJ (materials). Price consolidation above this 7197 level will provide a base and means to meet the index price target of 7715 as this remains in place.


XJO DAILY  

Price structure:
While the Weekly chart shows simple consolidation, the Daily chart shows the detail within that consolidation, currently the Daily chart is developing a continuation pennant pattern, last Friday’s engulfing bar shows as a good signal of price support. 

 

Indicator:  Relative Strength 14
With the RSI now moving back over the key 50 level, price momentum is again positive, this level should be monitored in the short term as price tests current support levels. While consolidation takes place the Relative strength can swing higher and lower. Traders would wait for the technical price pattern and the RSI to confirm direction.

 

Indicator:  VOLUME
Trading volumes remain robust during the later part of the week indicating accumulation rather than distribution.

Black and White Technical Report: The Week Beginning 05/07/2021, FP Markets

Comments from last week:  Last Monday the index went into a strong down day, however this was set on relatively low volume for the large move witnessed. There are 2 types of selling “committed selling” (bearish signal) and “no buyer” days where the markets move lower only because the buyers stand back. The Tuesday recovery is the key to this week’s market movements, as the Daily chart shows consolidation within the Monday down range. The new trendline is being developed and remains tentative until a further test.

S&P 500 WEEKLY
Price structure:
The S&P has set a “Primary move” last week as the price action begins to show a directional move. (not overlapping previous bars)  This is a good signal for further continuation.

Reversal would take the form of a single key reversal bar (overlapping) or a corrective price movement below 4150.

The price range of 2 weeks ago was strong, last week may also be regarded as strong with a minimal lower shadow for the week.

 

Indicator:  Relative Strength Indicator 14
The Relative Strength Indicator has moved to a divergence sell signal, similar to February 2021. Although the reading has moved back to the 70 level, the indicator still remains in divergence from the price structure.

Should the RSI again show a movement below the 60 level, this would be a second bearish signal.

It should be acknowledged the RSI has also remained above the key 50 level for the past 12 months.

Black and White Technical Report: The Week Beginning 05/07/2021, FP Markets

Comments from last week: With closing price support developing along the 4150 level, last week’s record close sets up the Index to move higher in the coming week. Of concern is the underlying Relative strength, see below. The Weekly range has expanded from the previous consolidation weeks. Underlying primary trend remains UP.

 

S&P 500 DAILY
Price structure:
Last Friday’s impulsive price movement has taken the index back over the extended long term trendline (now invalid) on an extended price bar (Friday). Traders should monitor this event for a possible exhaustion move when reading with the RSI notes below. With an extended move of 10 days higher highs and higher lows, profit taking may be swift, taking the market back to test the 4230 level. Currently there is no evidence of a top formation, only the potential for short term exhaustion.

 

Indicator: Relative Strength 14
From the sharp movement down below 50 to the equally sharp movement up over the 50 to the 70+ level putting the Index back on a positive momentum path.  This indicator is now being monitored for a divergence sell signal with a first swing below 70.  

Black and White Technical Report: The Week Beginning 05/07/2021, FP Markets
Comments from last week:  The pivot point set on Monday has preceded the move back to move under the extended and previously broken trendline.  The trading range from 4062 – 4230 looks to have broken to the upside; traders would monitor the Index for a retest of the breakout level (4230). This will be the important level to hold in any retracement move.

 

USD Spot GOLD – DAILY     
Price structure:
The long term support level of $1764.30 was tested and broken during the past week. What is important to observe is that the price also broke below the low (HL) set at the end of April and quickly recovered above the $1764.30 support/ resistance level. A very good short term bullish signal for buyers with a potential retest of $1863.66 underway.

 

Indicator:  Relative Strength 14
The RSI has set a positive divergence pattern as price made a low last Tuesday. This type of divergence is highly reliable for the short term trader. Relative Strength must now move back to the 50 level to show any real sign of price strength for the longer term holder.

Black and White Technical Report: The Week Beginning 05/07/2021, FP Markets
Comments from last week:
 Gold settled into consolidation above the key support level of $1764.30, the pennant pattern may be a continuation pattern and further test the lower target of $1725 in the coming days. The Weekly trendline has been overlaid on the chart to show the $1725.0 level is in line with this trendline. Trader would look for a reversal signal at this level to confirm support.  The turn in the Relative strength from last week may be the early signal for a Bullish divergence signal, however this is NOT the case with Friday’s higher reading in line with the higher close on the chart.

 

SILVER DAILY    
Price structure:
In line with Gold, Silver also made a new low and set a fake output, but the chart remains structurally stronger than its Gold counterpart. Look for the resistance level of $27.00 to be tested in the coming week as Silver makes another attempt to break out of the long term consolidation between $24.60 and $28.40.

 

Indicator:  Relative Strength 14
An indication of price momentum using the Relative strength Indicator (14) as the reading has moved and remained below the 50 level. This type of movement could be expected in this type of price consolidation. In the shorter term observation the RSI last week set a higher low reading above the 30 level a signal of bullish divergence.

Black and White Technical Report: The Week Beginning 05/07/2021, FP Markets

Comments from last week: The impulsive move lower 7 trading periods ago remains the dominant trading period on this daily chart with last week’s price action developing into a consolidation pennant. A breakdown to test the $24.60 would be the logical move from here. Silver has remained within a trading range of $24.00 to $28.40 for the past 7 months. There is no evidence of a breakout either way. However, Silver remains highly tradable within this range.

 

AUD GOLD DAILY    
Price structure: 
Last week saw a good test and hold for the AUD XAU price. Last Friday’s Shooting star may be the setup for retesting this short-term support at 2332.0. With the potential for an extended move higher in US$ Gold, the outlook for the AUD XAU value remains positive. This should flow through to higher prices in the Australian listed Gold producers.

 

Indicator:  Relative Strength 14
Relative Strength moving back over the key 50 level is a positive for price momentum. But price is everything, with a potential retest of support the RSI would be expected to dip lower in the coming week.

Black and White Technical Report: The Week Beginning 05/07/2021, FP Markets

Comments from last week: Strength in the $AUD and weakness in the $USD Gold price has seen the XAU AUD grind lower toward key support at $2300.00. Local producers, NCM, NST, SLR, GOR have traded well in light of this price weakness, however continued weakness In this index may follow through into the local producers in the coming days.

 

COPPER DAILY   
Price structure:  LME Inventories remain historically low as the Chinese release stockpiled product.
The “midpoint” resistance set from the strong bar of 3 weeks ago is set at $4.33. This may be the go-to level for Copper in the coming week. A closing price over this level would be a very bullish signal for further gains in the coming weeks. The price chart is currently setting up a consolidation range between $4.00 and this current resistance of $4.33, a breakout either way of these levels would be very decisive.

 

Indicator: Relative Strength 14
Confirmation of a loss of momentum is shown when the RSI moves below the “70” and now testing the 50 level, a further movement below 50 signals a loss of positive momentum and would confirm a potential retest of $4.00 underway. The RSI requires a continued reading above the 50 level to signal positive price momentum.

It should be remembered the RSI can track above the 50 -70 level for many months at a time and currently remains a signal of positive price momentum.

Black and White Technical Report: The Week Beginning 05/07/2021, FP Markets

Comments from last week: The impulsive price move of 2 weeks ago remains the dominant feature in the Daily Copper chart. Last week’s lower opening price ($4.13) and following rally higher is a good signal the current low has been set. As support becomes resistance, this week may see a retest of the key $4.50 level; a further close over this level would be a bullish signal for further gains.

Rejection of this level could see substantial selling enter the market with a retest of $4.00 support.

 

AUSTRALIAN VOLATILITY INDEX
Currently the underlying Volatility remains steady below the key 13 level, traders should monitor these levels as an indication of market sentiment as a leading indicator for equities. Overall, in the chart looking back to MAY 2020 the volatility levels have steadily declined, a good outcome for a forward steady and higher equities market.

The XVI is the difference of 1-3 month forward pricing of ETO Options against the 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 of the underlying market.   

Black and White Technical Report: The Week Beginning 05/07/2021, FP Markets

Comments from last week:  As the US markets VIX declined, the Australian XVI also collapsed back below the 13 level. This remains a good signal for further gains in the equities markets as the price of risk cover declines.

USD DOLLAR INDEX  
Price structure:
Following a very strong bullish move towards the “neckline” the final bar has set an outside range (reversal) for a potential retest of 91.66. But this would be a strong positive for the underlying strength of the DXY to resurface and set up for another retest of the neckline and potentially 93.45. In the larger view, the inverse Head and Shoulder pattern has an extended price target of 94.85.

 

Indicator:  Relative Strength 14
Relative Strength has set a new high over the 70 level and dipped below, while not a divergence signal, the RSI falling below the 70 level from a 1 bar reversal suggests momentum has changed sharply lower.

Black and White Technical Report: The Week Beginning 05/07/2021, FP Markets

Comments from last week:  Daily consolidation has developed in the DXY with current support at 91.66 remaining in place. This would be expected following a strong series of moves from the lows below 90.85. The impulsive moves would also be expected to continue given the lower shadows of the current daily bars indicating buyers at a lower price. The expectation would be for a continuing retest of 93.45.

WTI CRUDE OIL
Price structure:  This commodity is news driven by supply -demand.
Traders have started to talk about $100 Oil before Christmas 2021. At the current rate of advancement that may come to pass and, in the process, may be the circuit breaker for high inflation. The Major resistance of 75.20 from July 2018 has been broken, but many more levels of resistance remain between this current value and $100.0. Currently, with RSI turning sideways, price consolidation would be expected at these levels with $66.00 remaining the major support level. This is a good outcome for Australian producers WPL, OSH and STO.

 

Indicator: Relative Strength 14
RSI turning higher over the 70 level, in line with current price moves, only confirms the underlying price momentum.  The RSI may be showing a larger time frame divergence signal from Q1 2021 high. Look for a swing below the “60” level to confirm.

Black and White Technical Report: The Week Beginning 05/07/2021, FP Markets

Comments from last week: West Texas remains in an extended price move higher.  The West Texas contract remains positive with a new higher low and higher high during the past week.  The first observation will be of the continued support of the short term trendline. Resistance shown at $75.20 remains the preferred target, however consolidation above $66.00 support level the potential outcome following 4 weeks of gains. 




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