Black and White Technical Report: The Week Beginning 14/02/2022

Equity markets again moved lower into the close last week, while markets contemplate a rising interest rate and rising inflation rates environment for 2022.

Price volatility ( see XVI chart )remains high and looks set to continue in the coming weeks.

The Commodities space is historically strong during these periods and this sector has again remained the strongest during the past week.

WTI Oil has now entered an extended move, these type of movements can continue for many weeks the ultimate price target of the 2014 high at $107.0 bl remains.

Gold and Silver both made a strong impulsive move higher last Friday. However both remain well inside their respective long term consolidation price windows, given the strong one day strength, profit taking will be swift.

$AUD Gold, the pivot point reversal and following short Bullish flag has culminated in Fridays extended move higher over the 2600 level. A similar move could be expected in the Australian Gold producers this week.

XJO WEEKLY
Price structure:
Following the previous IPu last weeks range low to high has increased, however the closing price centred around the 7200 level as rejection of higher prices took place. This market has the potential to “retest” the lows along the 6900 level. The risk of setting a “lower high” remains, should the Index move below the 6780 level a down trend would be declared.

Indicator: Relative Strength 14
Relative Strength has turned higher, as the reading has moved away from the 30 level, the next move in the RSI will be telling should it move higher above the 50 level. Further higher price rejection will see the RSI turn lower. The Relative Strength Indicator reflects price momentum the current weekly closing price still reflects slowing momentum.

Comments from last week: With the previous test down to 6758, last weeks closing high at 7120 falls short of the resistance level of 7200. Last week’s inside period up close (IPu) indicates the market in balance, but the key observation will be a breakout above 7200. Further consolidation below this level would add to the premiss of a broad top being formed with the “lower high” already set from 5 weeks prior. Should a breakdown below the tested low of 6758 occur, the XJO Index would be declared a Bear market having set a new low.

XJO DAILY
Price structure:
The shooting star rejection of high price has followed through to complete a Pivot reversal. Although the close remains above the key 7200 level, these reversals have a very high follow through outcome. Following the recent strong rally from the 6758 low point, some profit taking should take place, the depth of the retracement will give insight to the underlying strength in the market.

Indicator: Relative Strength 14
The Relative Strength Indicator (14) reflecting the underlying price momentum has moved lower from above the 50-level indicating a shift to slowing bullish momentum.

Indicator: VOLUME
Trading volumes have been relatively high during the past week leading to Friday’s low volume on the retracement, volume will be monitored for any further increase as a signal of sellers entering the market.

Comments from last week: The Month of January on average closes higher only 40% of the time. The past weeks recovery of price has not been strong, showing some indecision in the current rally. With days that “overlap” a secondary movement may be underway, the resistance level of 7216 will be the key level this week. A positive observation is the high volume on Friday’s high close.

S&P 500 WEEKLY
Price structure:
The S&P 500 has shown the second rejection of the 4545 level with a strong move lower. The larger view indicates the Index remains within a consolidation zone extending back to August 2021. Should further price weakness extend below the 4240 level, a new Bear trend would be declared.

Indicator: Relative Strength Indicator 14
The sharp movement below the key 50 level does signal an extended loss of momentum from the November 2021 high and potentially further price weakness. The failure at this important level is the key observation from the past week, and will again be the key observation in the coming week. Price movements are considered positive with a reading above the 50 level, with this reading below the 50 level the Index has accrued more loss points than gained in the look back period of 14 (weeks).

Comments from last week: Key observation is the rejection of the 4545 level in the past week.
From the Bullish “hammer” bar of two weeks ago the follow thru has been limited to a retest of 4545, this will be the key level in the coming week, only with a cross above this level giving a bullish signal. The broader picture of the S&P 500 is of a consolidation range developing from Q1 2020 confirmed with the retest of 4200 two weeks ago.

S&P 500 DAILY
Price structure:
The daily chart of the S&P 500 clearly shows the rejection from the 4590 level with a second Gap open sell leading to the Pivot reversal. Last Friday’s strong range testing down to the 4372 level is a strong follow through, and can lead to a further decline. This Daily view has set a lower high confirmed with the pivot point, a further breakdown below 4240 would set the Primary down trend in place as mentioned in the Weekly chart observation.

Indicator: Relative Strength 14
Relative Strength Indicator (14) has turned lower and is below the key 50 level. A continued lower close below the 50 level would alert traders to further decreasing price momentum. The overall decline in the Relative strength from November 2021 is notable as the failure to achieve a reading above the 70 level during this period only reflects the underlying market sentiment.

Comments from last week: The OPu from 2 weeks ago has completed it’s outcome with the market trading higher. The key observation now is the 3 candle “evening star” reversal set last week followed by Fridays mixed range high to low
with the narrow open to close.
With the market at an inflection point of 4600 resistance and 4240 support, only a close above 4600 would put the buyers
back in control.

NASDAQ DAILY
Price structure:
With he second “evening star” in place the Nasdaq has again followed through with a strong decline last Friday. This type of momentum move testing the 14076 level may extend to retest the tentative trendline. This “lower high” being set below the 15700 is concerning as a break below the January 24th. Low would place the Nasdaq into a Primary down trend.

Indicator: Relative Strength 14
Relative Strength has moved above the 30 level but remains below the key 50 level, indicating very weak and negative price momentum on the weeks price movement remains. The overall decline in the Relative strength from the November highs is now following through with weaker prices.

Comments from last week: The Nasdaq has also set a 3 candle “evening star” pattern identified by the gap either side of last Thursday’s high candle, this also sets a reverse “pivot point”. The immediate support level to hold is 14535, the potential to retest 14076 remains as this consolidation area builds. The Nasdaq has entered a Primary down trend.

USD Spot GOLD – DAILY: Bull market, maybe?
Gold put in one of the strongest trading ranges for many months with the breakout above the historical down trendline. Last week’s note commented on the potential Bear flag setting a new decline. The arrest of that scenario cannot be discounted in our observation of price movement. Resistance at $1876.90 remains in place and should be monitored for a point of profit taking. A fundamental change has occurred in the price action with Gold moving across to a Bullish outlook.

Indicator: Relative Strength 14
Relative Strength shows a reading above the 50 level and turning higher from this important level, as upside momentum continues this may continue to rise. A movement over the 70 would be very Bullish for the immediate, although also a place to consider divergence signals.

Comments from last week: Gold is like the old report card “works hard but could do better”. The current price developments show a Bear Flag building with the potential to again retest the long term Weekly trendline. There is nothing Bullish about this chart as Gold remains with a very large consolidation period. In general, over the past 12 month period, the chart shows the down close bars to be impulsive (large range) while the rallies remain muted and of a secondary market nature.

SILVER DAILY
Price structure: No Bull market.
The OPu (outside period up close) shows the lower wick testing the $22.50 level prior to the high close. A very good outcome for further gains. However Silver remains within a large consolidation zone, a further movement over the down trendline and recent January higher high would be a very bullish signal for further gains.

Indicator: Relative Strength 14
Current Relative Strength is moving above the 50 level and now turning sideways shows price momentum is simply fluctuating, typical of consolidation patterns. A continuing move above the 50 level into the 70 level would be very bullish in the short term.

Comments from last week: Six days of consolidation at the base of a sell down from $24.50. The $22.50 level identified from the August 2020 low continues to be the resting place as rallies are sold and declines are purchased. The current “neckline” is of concern for a move lower to again retest the $21.60 level.

AUD GOLD DAILY
Price structure:
The pivot point reversal and following short Bullish flag has culminated in Fridays extended move higher over the 2600 level. A similar move could be expected in the Australian Gold producers this week. Although the chart shows extended consolidation periods the overall trend is UP again confirmed this week with a new high.

Indicator Relative Strength 14:
Relative Strength moving sideways has turned higher and remains above the key 50 level from a quick dip below this key level, shows positive momentum, this ranging movement is typical with consolidation areas.

Comments from last week: The current Pivot point reversal set a new Higher low above the $2477 level a good outcome for the local producers. The potential for the $AUD to spike on any interest rate decision, thus lower the $AUD Gold price remains a concern for the long term potential for price growth in the local producers.

COPPER DAILY
Price structure:
What should have been a follow through from the strong mover higher two weeks ago has resulted in a shooting star rejection of the $4.70 level. Consolidation looks set to continue for this base metal reflective of the underlying Global economy. With the risk of higher interest rates cooling manufacturing Copper continues to consolidate within a well-defined trading range between $4.00 and $4.80.

Indicator: Relative Strength 14
Current readings swing above and below the 50 level reflect the current consolidation 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: A great week for Copper with a side by side reversal at the Trendline support to retest and close in on the $4.50 level. Although Copper remains within a large consolidation area the $4.33 level is the key support area and the potential launching place for a Bullish trend.

AUSTRALIAN VOLATILITY INDEX:
Price volatility remains high bringing selling pressure into the equities market. With the risk of runaway inflation and higher interest rates, markets are making the necessary adjustments.

The XVI suggests further price weakness in the coming week.

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: A reduction in forward price of insurance (Put options) indicates a lowering of volatility within the broader equities market. This will be broadly supportive of gains for the equities market, be aware this can change very quickly on any bearish reversal witnessed in the Indices.

USD DOLLAR INDEX
Price structure:
The new Higher Low (HL) and follow-on movement above the 95.70 level, may lead to a further retest of the 96.93 level and higher. The $USD Index remains as a Primary UP trend with 97.75 as the nest price target.

Indicator: Relative Strength 14
The Relative Strength has turned higher in line with price movements and should now be monitored for further strength as the current reading at the key 50 level should move higher, a reading towards the 70 level would indicate very strong positive price momentum.

Comments from last week: Pivot point in place at last Monday’s close set the stage for a move lower, any price movement higher at this level will set a new “higher low”. The recent 94.6 low and the recent high at 97 suggests a widening volatility pattern is developing, this can lead to a very
Bullish break out when complete, which may take 2-3 weeks. The confirmation of this will be a move below 94.60 with reversal to break above the 97.0 high.

WTI – CRUDE OIL
Price structure:
This commodity is highly news driven by supply -demand. The WTI contract has entered an extended price move with a series of higher high and higher low Weekly bars. Historically this has happened before Q4 2020 to Q1 2021 as an example. The WTI contract remains within a Primary UP trend without a signal of an impending high in place. Oil to $100 bl. The next important price target remains the 2014 high of $107.73.

Indicator: Relative Strength 14
The current price strength has not produced a new high in the RSI, this will now be monitored for a developing divergence signal, although it may take many weeks to develop. The Relative Strength crossing the 70 level is not a signal of over brought as the reading can remain strong for many weeks.

Comments from last week: Political events pushing Oil higher? Or just a good old-fashioned bull run in a controlled supply commodity facing higher demand? The extended range bar last week may signal exhaustion following a strong run from the $66.00 level. A retest lower may set a new higher low and continue the extended run into $100 oil and retest of the 2014 high at $107.73.