Black and White Technical Report: The Week Beginning 17/05/2021

The markets sudden attention to potential price inflation via rising US10Y yields has halted the current equities rally into a potential consolidation period.

Gold and Silver along with Copper are holding recent gains, with the current technical picture remaining very bullish for all precious metals.

While the Copper price is focused on under supply issues, other precious metals have fared well suggesting continued underlying economic strength.

The current retracement in equities could be short and sharp prior to a new leg higher, as underlying Primary trends so far have remained technically positive.


Price structure:
Last week’s Outside range down close (OPd) has again set resistance at the 7130 level. The OP is a very strong marker for turning points following a rise in price. However it is not the signal for a bear market move, although the #3 candle of 4 weeks prior is playing out. The underlying Primary trend for the XJO remains UP with a secondary consolidation period underway.

Further price weakness may see the 6737 support level tested, this will a key hold level in any further consolidation decline.


Indicator: Relative Strength
The RSI indicator has remained over the key 50 level, last week turned lower, this is a signal of slowing price momentum, however the reading remains above the 50 level indicating price momentum remains positive.

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

Black and White Technical Report: The Week Beginning 17/05/2021, FP Markets

Comments from last week: The market did not do the retest of 6737 noted last week, however the trading range remains short in comparison too previous weeks and below the key 7130 resistance level.

The consolidation remains to the high side of the impulsive weekly move shown 5 weeks ago, a strong signal of buyers holding positions with an expectation of further gains.

A breakout over 7130 would be a very bullish signal for further gains.

Price structure:
Last Monday – Tuesday displays a classic “pipe reversal” as price immediately rejects and moves back into the recent consolidation zone above 7000 points. Friday’s close above this 7000-point key level is a signal of short term support. In the coming week this will be the level to hold, a closing price below this level may see further declines back to Daily support of 6837.0 as a retest of the early April breakout.  

Indicator:  Relative Strength
The reading does show Relative Strength moving lower below the 50 level with price weakness, the 50 level is the key level to hold for the market to make further gains.

This should now be monitored for a further move lower on any price weakness. 


Indicator:  VOLUME
Overall volume has been increasing as price declines, Last Wednesday’s and Thursday’s volume was high on the down close for the day. Further price gains would again need strong volumes to confirm broad market participation.

Black and White Technical Report: The Week Beginning 17/05/2021, FP Markets

Comments from last week:  The 5 period simple moving average seems to be a good short term indicator for price support. The Daily XJO is developing an ascending pattern, a close over 7090.8 would be significant and may be followed with further gains. Traders would monitor any breakout for a retest and hold of the 7090.8 level as confirmation of price strength.

Price structure:
The bearish signal #3 may have played out, last weeks lower shadow below the 4114.0 level with a close above this level is a short-term bullish signal. Tech stocks (also listed in the S&P) have regained some losses taken over the past 2 weeks. The underlying Primary Trend remains UP, but price consolidation is underway with last weeks range covering the previous 5 weeks of price action.

Traders would look for a further close below the 4114.0 level as an early signal of a potential “top” in place.


Indicator: Relative Strength Indicator
The RSI observation remains the key signal and is currently reflecting weaker price momentum as the indicator moves below the 70 level. With the reading moving sideways, this is not a level of over brought, and only indicates very strong momentum, and can last for many weeks.  (This type of momentum is often a precursor to profit taking.)

Should the RSI show a movement below the 50 level, this would be a strong bearish signal.

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

Black and White Technical Report: The Week Beginning 17/05/2021, FP Markets
Comments from last week: The US markets all turned higher last weeks following a weak jobs number, the expectation of Financial Stimulus to remain has underpinned risk in the markets.

The S&P 500 closed at an all-time high, however the Weekly bar also set a #3 type bar with a longer lower shadow, this is often a precursor to market weakness in the coming weeks, but any real market reversal requires price reversal evidence!!

Rejection can come in the form of a pivot point or engulfing down close bar, only then can we start to talk about a “top” in the market.


Price structure:
The long term trendline is now broken and may be in the process of being backtested. From Monday’s pivot reversal the “GAP” shown from Tuesday open is being “filled”, the Daily chart shows a further price gap below this current level.

Without follow through from Wednesdays decline the Thursday IP (inside period) has shown the market in balance.

Trader should be aware the high price needs to be taken out in the next few days OR this may be the beginning of an a,b,c type of decline, in this case the price GAP at 4035 would be the first target.

Indicator: Relative Strength
Relative Strength short term has turned lower below the 50 level and turned higher again but remains in a down trend. The indicator should be monitored for readings above the “50” level. 

Black and White Technical Report: The Week Beginning 17/05/2021, FP Markets
Comments from last week: 
 Almost achieved the retest of 4100, but the market has now pushed higher to again set an all-time high price. Last Friday’s close is outside of the recent trading range and sets up a continuation signal. The underlying trend remains up.

Price structure:
Gold remains in a Primary UP trend.

This remains a very bullish chart with a new pivot point completed on Friday’s close. $1863.66 remains the key level to cross in the coming days.

The other important observation is Friday’s expanding price range. The general observation of the past 2 months is the strong price range bars are to the up side in contrast to the January – March period of declines.


Indicator: Relative Strength
Relative Strength turns sharply higher and remains above the key “50” level in line with the current breakout of the trading range developing. This is a good confirmation signal of changing momentum and could be monitored for a further close above the 70 level.

Black and White Technical Report: The Week Beginning 17/05/2021, FP Markets

Comments from last week: A new Primary trend is now underway. Last Thursday’s and Friday’s impulsive price move now dominate the chart. The next resistance level is shown at $1863.66. Should profit taking enter the price action a retest of $1797 would be a sharp move and may offer a buying opportunity.


Price structure:
The daily chart shows Silver in a game of “inches” with $26.0 the key resistance turning to support for many weeks and now the $27.0 – 27.70 area becoming the key levels to monitor.

Silver remains very bullish with the next target resistance shown at $28.40 following last Friday’s continuation pivot point.

The Primary trend is now confirmed as UP. 


Indicator:  Relative Strength
A good indication of price strength is showing in the Relative Strength Indicator (14) as the reading is now over the 50 level as this breakout from consolidation shows strong momentum. The decline below 70 is in line with price consolidation with the current levels remaining bullish.

A bearish signal will be displayed with RSI moving below the 50 level.

Black and White Technical Report: The Week Beginning 17/05/2021, FP Markets

Comments from last week: The daily chart of Silver also shows an impulsive price move away from the $26.00 support level with resistance met at $27.70.

This historic resistance level is now the key level to break, current momentum would suggest a breakout higher into the $28.50 level.


Price structure:
Gold in AUD terms has crossed a significant price barrier as the final down trend line is breached. Following the consistent rally, some consolidation would be a good outcome in the coming days. This will depend on the $AUD remaining stable to lower and the underlying USD Gold price continuing to rally.

The Australian Gold producers stock prices are very price sensitive around this chart, this may be the catalyst for further investigation into the induvial stocks.


The smaller Australian speculative explorer stocks will remain news dependant.


Indicator:  Relative Strength
This momentum indicator has continued a wider swing higher over the key 50 level in line with price gains to reconfirm a valid RSI buy signal. 

Black and White Technical Report: The Week Beginning 17/05/2021, FP Markets

Comments from last week: The final bearish hurdle is now in play, the down trend line set from back in 2020 is the current resistance point. The “shooting star” from Friday is a bearish reversal signal if the market follows through lower. This will be dependent on the USD Gold price pushing higher and / or the AUD moving lower.

Price structure:  Inventories remain historically low. 
Copper remains trading at all-time highs.
Potentially a reversal signal showing in Copper, but the strong observation is price remaining above the $4.61 level.

Following the recent strong rally, some consolidation above the $4.60-$4.61 level would be an ideal outcome.

Indicator: Relative Strength
Relative Strength has moved above the 70 level and higher than the earlier reading, this constitutes a failure in the potential Bearish divergence signal. 

Confirmation of a loss of momentum will be shown when the RSI moves below the “70” level and below the internal low set during February. The highlighted level in red.

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

Black and White Technical Report: The Week Beginning 17/05/2021, FP Markets
Comments from last week:  
 The failure of the “shooting star” to follow through lower with last week’s strong range and close on the high only suggest further gains.

Traders should be aware the price chart is described as an exponential price movement and will be subject to sharp price movements should profit taking enter the market is a change of the current very bullish sentiment.


The fear gauge has turned higher with the markets considering the prospect of increasing real inflation being a weight on equities. (this may turn out to be a false outcome)
The underlying markets remain somewhat Bullish. The expectation would be for a decline in the XVI reading in the coming week. But traders must be aware the forward pricing of risk is increasing.

The XVI is the difference of 1-3 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.   

Black and White Technical Report: The Week Beginning 17/05/2021, FP Markets
Comments from last week:
 The benign reading in the XVI remains a positive for Australian equities, but it should be noted the range expansion during the past week. The higher midweek range shadow shows volatility can easily become elevated as markets enter period of price volatility.

Price structure:
Technical rejection of 90.85 is the key development in the past week. A movement below 90 and further declines may help precious metals hole recent gains. 

(The underlying AUDXAU chart (above) may find some selling pressure on any further USD decline offsetting some recent gains.)

Indicator:  Relative Strength
While the RSI has turned lower, while below the 50 level, this will be monitored for a cross of the “30” level as confirmation of downward price momentum increasing. 

Black and White Technical Report: The Week Beginning 17/05/2021, FP Markets
Comments from last week: 
 All recent key support level has failed, the current 90.00 level is now key in the short term. The large range set on Friday only suggests further weakness.

The Primary trend has changed to DOWN with the potential for further declines over a longer period of time.

In contrast the US 10 year bond yield has put in a reversal bar and shows yields may be further increasing in the near future.

Price structure:  This commodity is news driven by supply -demand.
From last week’s comments the price consolidation between $66.00 and $61.80 remains.

The $61.80 level remains the critical level to hold for the Weekly closing price.

Although these ranges are highly tradeable, WTI needs a breakout to confirm further direction. 

The $75.20 remains the preferred target as the underlying Primary UP trend remains in place.


Indicator: Relative Strength
RSI turning sideways while above the 50 only indicates slowing price momentum in the current price consolidation phase. 

Black and White Technical Report: The Week Beginning 17/05/2021, FP Markets
Comments from last week:  Continuing price rejection at the $66.0 level is not a good signal for further strength. The best outcome is for further consolidation between $61.80 and $66.0.

The current price bars remain short in range compared to what the contract is capable of, but traders should be aware range expansion may give the next strong BUY signal.

A breakout over the $66.00 level would first target $75.20.

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Source - database | Page ID - 21447

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