Monday the US cash markets remain shut for President’s day.
Equity markets again moved lower into the close last week, while markets contemplate a rising interest rate and rising inflation rates environment for 2022.
In the immediate future is Ukraine – Russia on again off again the potential for war.
Price volatility (see XVI chart) remains high and looks set to continue in the coming weeks as the economic world contemplates and adjusts for higher inflation and the Ukraine outcome.
The Commodities space is historically strong during these periods and this sector has seen some consolidation in prices.
Gold begins to test for a new all-time high, at this point Silver is trailing behind and remains within a large consolidation zone.
While the past week made a new high from the previous week, prices have again found the sellers pushing the index into the low for the week. The “shooting star” is a strong warning of weaker prices in the coming week. The 7200 level remains a significant resistance level. While “levels” may be arbitrary, the importance is the reflected underlying market. Sentiment, which during the past week has deteriorated as the prospect of inflation and War hangs overhead.
Without a change in sentiment the potential to retest 6900 remains.
Relative Strength has turned lower, as the reading has moved away from the 50 level, the next move in the RSI will be telling should it move higher above the 50 level. Further price weakness 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: Following the previous IPu last week’s range from low to high has increased, however, the closing price centred around the 7200 level as a rejection of higher prices took place. This market has the potential to “retest” the lows along with 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.
The Daily chart displays the “fake out” (last Thursday) where the price moves above the previous high point and fails to continue with a close inside the intimate resistance level. In this even the retest of 7370 is complete for now.
The Relative Strength Indicator (14) reflects the underlying price momentum has moved lower from above the 50-level indicating a shift to slowing bullish momentum. A cross below the key 50 level would indicate a loss of positive momentum.
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 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 points, some profit-taking should take place, the depth of the retracement will give insight to the underlying strength in the market.
The S&P500 displays continued rejection of the 4545 level following the breakdown from the multiyear rising wedge with 4320 remaining current support a level identified with the rising pattern. The current price structure is building a “lower high” the potential for a breakdown below 4200 remains, should this occur a Bear trend will be declared.
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) and continues to decline sharply. The potential for an accelerated move lower remains as momentum declines.
Comments from last week: 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. 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.
There have been two key rejections at the 4600 level confirming sellers have price control. Although the lower shadows on the daily bars suggest some form of price support in buying the dip. How-ever the Dilay chart shows a Pivot reversal set last Thursday with follow through on Friday as sellers test the January low in the 4300 area.
The Daily chart remains within a confirmed Down trend.
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 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 downtrend in place as mentioned in the Weekly chart observation.
The long term tentative (two touch) trendline is currently being tested, should the price hold these levels the trendline will be confirmed (third touch). Last Friday’s closing price is within 6 points of the January low and again trading below the 14076 support level. A breakdown of the trendline would target the 13243 historical support level.
Relative Strength 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: With the 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.
Last week displays a significant breakout above the key resistance level of $1876.90 as a further development from the impulsive price move away from the developing Bear flag two weeks ago. Last Friday’s failure to follow through may signal exhaustion high developing just short of the all-time high of $1916.40. Price development at this level will be crucial to a further breakout.
Relative Strength with a reading over the 70 does not necessarily suggest the price has reached an “over brought” area, rather it only indicates very strong price momentum is in play. This type of momentum can lead to exhaustion tops as profits are protected. During May 2021 the RSI remained over the 70 level for a full 4 weeks.
Comments from last week: 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. 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.
The price of Silver remains below the long term down trendline. Last Friday has set a bearish fake out (FO) of the earlier OPd high point. Price reversal lower will set a new lower high, a close below $23.50 will confirm selling is underway. As the “tentative” trendline is currently being tested a breakout higher and a successful pass of the $23.73 level will place Silver into a Primary UP trend.
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: 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.
With the $AUD remaining within a small trading range and the USD$ Gold price increasing, $AUD Gold has set several “impulsive” price moves higher as the Primary UP trend continues. Historical resistance remains at $2712.0 as the potential target. With price consolidation in the underlying $USD Gold this underlying price movement may also consolidate, prior to a move higher.
Relative Strength has turned higher and remains above the key 50 level from a quick dip below this key level, shows positive momentum, this trending movement is typical of a current Primary up trend in price.
Comments from last week: The pivot point reversal and following short Bullish flag has culminated in Friday’s 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.
Persistent resistance remains above the $4.50 level. The failure of the shooting star candle of 2 weeks ago to follow through lower remains a small positive for price to remain over the $4.50 level in the coming week. Last week’s inside bar is an important development for the Buyer as market remains above the significant support level of $4.33.
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: 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.
Daily volatility remains news driven; The Weekly chart displayed shows the forward price for buying risk cover remains high as the market contemplate the Ukraine situation.
Volatility remains elevated placing pressure on equity prices.
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: 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.
Currently, the 95.70 level remains the key level to hold and was again retested last Wednesday, Thursday and Friday. The USD Index remains within the 12 month price channel with the key resistance level shown at 97.75. This price structure above the 95.70 level is Bullish for further gains. A breakdown below this key level will see sellers enter the market for a retest of the underlying trendline.
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: 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 next price target.
The news in Ukraine has Oil making a new intra week high. The current extended price movement making a new intra week high shows some profit-taking with the week closing below the open. The potential is for a retest of the 84.25 level in the coming week. This will not change the underlying Primary UP trend, but this important support level should be monitored for further weakness towards $75.20.
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: 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.
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