Black and White Technical Report: The Week Beginning 12/10/2020

The US federal election along with various stimulus bills will continue to influence markets this coming week. As the US senate works on stimulus in the $trillions and US presidents encounter a miracle cure for Covid19, the Equities markets continue to soak up the excess liquidity and continue with extreme valuations too earnings per share.
There are 30 million unemployed in the US with a $2T+ stimulus spending program on the way, and consistent with the other economies Australia is to receive continuing Federal government stimulus. This has brought about a calming effect on the US and Australian markets with a significant reversal pattern in the XJO.
Volatility will be the underlying driver of prices in the coming weeks as markets enter this October “Bear killer” period.

The key concern remains, Tech leaders are driving the Index with underlying market breadth remaining on average below 70 %, (not all boats are rising with the tide).



October the Bear killer

During this time of year many commentators seem to go into overdrive with all sorts of predictions for the coming 3 months.
Many refer back to the 1987 October crash as evidence to be wary at this time of year.
Consider this, the market has only made 2 significant corrections of this magnitude
in the 114 years, 1929 and 1987.

It is our business to take advantage of statistical facts to tip the advantage in our favour.


Statistical months of October and November for the XJO

Black and White Technical Report: The Week Beginning 12/10/2020, FP Markets

The stats above show us that October is really market dependant. When markets are bearish October is bearish, when markets are bullish as they are now October can be a very positive month. The statistics show us October is down only 10 out of 28 years where November is down 11 out of 28 years.


Price structure:
An impulsive and primary movement in the index sets up a key reversal event with 6200 as the immediate short-term target. A breakout over the 6200 resistance level has the potential to end the “secondary movement” and set a new “primary move” underway. This type of breakout will require the continued price support in the Banks ANZ, CBA, NAB and WBC and major resources BHP and RIO along with CSL and WES.


Indicator: Relative Strength:
A sharp response from the RSI indicates this may have follow through as the signal line crosses upward over the key 50 level, a very bullish signal. Further consolidation in the price chart below 6200 may see this this dip further below the key 50 level targeting the 30 level.


Indicator: MACD
MACD confirms the swing “Sell” signal again this week and has continued with a further dip in the fast line now crossing the slow signal line, only reflecting the slowing momentum. The completed full cross over becomes the Sell signal. It should be acknowledged this indicator is very slow to react on a weekly basis and may track sideways in the coming weeks.

Black and White Technical Report: The Week Beginning 12/10/2020, FP Markets

Comments from last week: The support level of 5725 remains the key level in the coming week, the Bullish hammer from 2 weeks ago has failed to follow into higher prices. It should be noted the low of last week did not break the low of 2 weeks ago. (it’s important) Volatility will remain until a confirmed breakout of this current trading range.

The whole price structure of the past 18 weeks remains in consolidation, these periods often lead to significant breakouts. Currently this market is swinging to a bearish breakout while price remains below 6200 and the midpoint of 5900 points. Traders should be aware October has a high statistical outcome for closing higher into the end of the month.


Price structure:
5 days of gains, last seen during the primary phase movements of April, May and June.

The first level of daily resistance at 6056 has been cleared with the 6200 level in sight. A breakout over this multi month resistance level would signal a new bullish leg underway, the observation of the “distribution top” would then be discounted as a large consolidation period. 

Volume comments (below) remain the key concern as price move higher.


Indicator:  Relative Strength:
RSI has turned higher again swinging between bearish and bullish signals, last weeks movement towards the “70” level is a very strong signal this bullish momentum may continue into this week.


Indicator:  VOLUME
Volumes continue increase on the “down” days, this is of concern as it suggests distribution not accumulation

Significant volume increases need to show on the “up days” to confirm the longer term bullish view. Fridays high close was not supported by strong volume. This will need to improve in the coming days to maintain a Bullish volatility breakout.

Black and White Technical Report: The Week Beginning 12/10/2020, FP Markets

Comments from last week:  It is of great concern the market continues to test the lower level towards 5725, and the down days are of a larger range than the up days. The potential for a “distribution top” remains. The Index although heavily weighted by the top 20 stocks shows the underlying sentiment of the market, further declines may develop towards a poor sentiment and follow through into the smaller end of the market.


Price structure:
Last weeks close above the 3460 “midpoint” is an important marker gain for the S&P. The large range bar has the potential to follow through in the coming week and retest the OPd all time high of 3588. Only a weekly close above this level will confirm the potential for a new bullish leg higher past 3650. The Primary UP trend remains in place.


Indicator:  Relative Strength Indicator
Relative Strength turning higher is simply a reaction calculation of the weeks large price range. There is not much to glean from its position as the prior move was not over the “70” level. A move below the 50 level is a signal of renewed bearish momentum.

Black and White Technical Report: The Week Beginning 12/10/2020, FP Markets

Comments from last week: With the Outside period Midpoint resistance shown at 3460 and Support at 3230 the S&P is displaying the hallmarks of a developing consolidation range, as we have seen in other markets these consolidation periods can last for months. Or in this case until the completion of the US elections. The #3 bar retest of 3230 support from 2 weeks ago is an early bearish signal followed by last week where the market closed towards the low of the range, a further signal for consolidation.


Price structure:
Mixed in with last weeks price action is the Outside period down close (OPd) this is the key retest of the 3350 support resistance level, and an important development in this advancing price action.
The daily “Gaps” of Thursday and Friday are of concern, a second daily retest towards the 3350 level around a surprise news event would not out of the question in the coming week.
The key concern remains, Tech leaders are driving the Index with underlying market breadth remaining on average below 70 %, (not all boats are rising with the tide).


Indicator: Relative Strength
Relative Strength has again turned higher and exceeded the 70 level a signal of strong momentum (not an over brought signal). Traders should be aware that the RSI crossing the 50 level does not generate a buy signal without supporting price action. As this type of price consolidation can last for many months.

Black and White Technical Report: The Week Beginning 12/10/2020, FP Markets

Comments from last week:  The developing support – resistance line at 3350 looks to the key short-term level to monitor. It is important to also note the a,b,c retracement from the Pivot point high is now complete. The current market structure remains in lacking direction, with further consolidation the best outcome.

Price structure:

The underlying price structure remains in a Primary UP trend.

The whole world still wants to be “long” Gold, until they don’t.

The Weekly chart of Gold still suggests prices remain within a consolidation between resistance of $1939.65 – $1970 and support of $1850. A breakout over the resistance levels would be significant setting up a potential retest of the $2075 high.
Caution remains as statistically this is a big ask, following the August bull run, to regain the $2075.0 high in a short period of time is unlikely.
This current move remains highly tradable from the point of view the $1858 level may have set the required “higher low” as part of an ongoing Primary UP trend. 


Indicator:  Relative Strength
Relative Strength turns lower to move below “70”, this can be monitored to remain above the “50” level, as the instrument may find consolidation at this “midpoint” level.
Further selling below last week’s low may see a complete loss of positive momentum. 

Black and White Technical Report: The Week Beginning 12/10/2020, FP Markets

Comments from last week: This is one of the better “technical” charts for establishing clear price support and resistance levels. While all of the reasoning is in place for a Bullish Gold market the price action tells a very different picture. The resistance levels are getting lower from $1970 to $1901.

The coming week will remain decisive for this market to regain the broken support at $1939.65 or at best hold the lows of $1850, both levels will be telling for the long term holders.

Price structure:
Australian Gold producing majors continue to struggle for price momentum as the headwind of the $AUD supresses the local price.

Last week’s pivot point is an important development while above the $2610 support level.

As this Daily chart shows the Gold price in $AUD terms is currently the same as April 2020.

Not included in this observation are the juniors with drilling and assay programs underway.


Indicator:  Relative Strength
With the RSI now falling, the crossover above the 50 level is a signal upward momentum maybe improving in the short term.
Traders would monitor this indicator for a swing higher in line with any price gains to confirm a valid buy signal, without this confirmation the current slow momentum is at risk of slowing further.

Black and White Technical Report: The Week Beginning 12/10/2020, FP Markets

Comments from last week: Australian listed Gold producers will remain under price pressure until this chart shows a Bullish structure, either by a falling $AUD or a significantly rising USD Gold price. Last Friday posted a bearish “Fake out” bar reversal, as the current larger bearish flag develops. $2610 remains the critical level to hold for the Bullish, a breakdown from this level would target $2560.


Price structure:
The higher low and Fridays impulsive move to make a higher high is a good development within this current price structure. The Daily trend for Silver has changed to UP.
Several resistance levels remain at $26.18 and $27.70.
This current pattern is highly tradeable to the upside and will be a significant boost for local silver players.  SVL KCN.


Indicator: Relative Strength
With RSI now below “70” and below “50” the recent “dip” below 30 shows the very weak price momentum underway. The current upturn still remains below the key 50 level and only reflects the current developing Bearish momentum pattern.

Black and White Technical Report: The Week Beginning 12/10/2020, FP Markets

Comments from last week:  The daily view of Silver has the potential to set a new “lower high” (LH?) as the Daily down trend remains in place. The chart now displays a new lower tentative trend line, further weakness in price may see this new level tested at circa $22.00. The July breakout level of $19.74 remains the downside price target in the near term. 

In the short term only a daily closing price above last Tuesdays high of $24.40 would set up a bullish view.


Price structure:  Inventories under pressure
Copper posts a key pivot point Buy signal following the short retest of $2.80 and the Flag breakout area. This important barometer of the outlook for Global economies is once again signalling expansion. 

Last week’s price bar is also regarded as impulsive as the range is larger than recent price bars with the high close of the week indicating further gains in the next opening.
The underlying Primary trend remains UP.
Look for next resistance at $3.20


Indicator: Relative Strength
Relative Strength has moved strongly over the 50 level and now moving back to the 70 level in the past 13 weeks. The current dip below the 70 level is in line with the price decline however the higher levels only continue to reflect the current strong upward price momentum, not necessarily an over brought sell signal.

Black and White Technical Report: The Week Beginning 12/10/2020, FP Markets

Comments from last week:  During the past week the shakeout in the price of Copper. As price moved significantly below the key support level of $2.98 only to see a sharp recovery into Fridays close.

A new tentative trend line is now drawn. The long lower shadow of last week is a warning sign of further selling to come, this scenario  should be monitored this coming week. In line with other market uncertainties Copper may consolidate around this critical level until more evidence of an underlying economic recovery.


This news driven indicator still remains uncomfortably high for a sustain bullish run in equities. Last week’s range shows how impulsive this market is to news, in this case the US president recovering from Covid19 and the on again off again US stimulus talks with the senate.
At 21.99 the closing level is lower than 2 weeks ago but remains elevated.

The XVI is the difference of 1-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.   

Black and White Technical Report: The Week Beginning 12/10/2020, FP Markets

Comments from last week: Probably the second most important chart behind the USD Index. Volatility has spiked higher on the news of President Trumps diagnosis. The immediate reaction has shown in the decline of equity prices. Historically a decline in volatility follows the types of events around US presidents. With the US elections so close, this level looks set to hold in the coming week.


Price structure:
A breakout above the trend line appears to be false, with recent price action now following the line lower back into the secondary consolidation area. Price action still has the ability to set a higher low, but this is not the short term observation.
Last Fridays bar is impulsive and suggests further movement to the downside, a positive for GOLD but not so for other commodities. This type of price action may keep prices for large commodity companies BHP, RIO and Vale in check for some time.
92.10 remains the key support level on any further weakness. 

Indicator:  Relative Strength
A complete breakdown of the Relative strength to move below the “50” level.
This is  a very bearish signal in the short term.

Black and White Technical Report: The Week Beginning 12/10/2020, FP Markets

Comments from last week:  The big picture for the USD Index is now one of a Major base in place set over the August September period. The breakout 2 weeks ago has tested the down trend line with the current retracement now testing the breakout level of 93.75. This type of pattern is often the precursor to a new trend developing, only a breakout over the trend breakout high would confirm this potential outcome.

The result will be the AUD will remain under pressure, good for local gold producers and the Iron Ore players.


Price structure: This commodity is news driven by supply -demand.
Good consolidation above the $35.81 level with another Bullish engulfing week, the key observation is this current low did not break the low prior to the pivot bar.
No trend is defined, with further consolidation expected in the coming weeks.
$42.0 remains the major resistance level once more.
Watch WPL and STO on the Australian Gas story.


Indicator: Relative Strength
RSI 2 weeks ago made a sharp recovery over the 50 level however 2 weeks ago the key 50 level was again lost, again last week a further cross of the 50 level is good, but at risk of turning lower again. 

Confused? So is the market.

Black and White Technical Report: The Week Beginning 12/10/2020, FP Markets

Comments from last week: A new trading range developing between support at $35.81 and resistance of $42.00. This market remains under pressure from Covid related decline in fuel consumption and general over supply. No underlying price trend is evident as the consolidation of from earlier 2020 plays out again.

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