Black and White Technical Report: The Week Beginning 22/06/2020

The technical picture is now starting to match the stretched valuation picture. The key feature of Technical Analysis is holding the view the market is forward looking. With a potential 2nd wave of COVIS-19 underway, markets are again trading higher volumes on down days, this type of distribution is now showing as intimate resistance levels in the Major Indices.

Underlying market volatility is higher this past week.

Gold is poised for a significant technical breakout, however traders should be aware Silver has not confirmed the same potential move. Within the precious metals sector indicators are showing overbought conditions and weakening momentum.

 

XJO WEEKLY
Price structure:
While not unusual to see some profit taking after a strong run, last week prices traded below the low of the bar that made the high, a sign of weakening price momentum. The long lower shadow but high close of last week’s bar (#3) indicates early selling and is often associated as a warning of lower prices in the coming weeks.

However the underlying primary trend remains UP.

 

Indicator: Relative Strength
Relative Strength last week moved over and under the key 50 level a signal of positive momentum, a continued reading over 50 would indicate bullish continuation however the “dip” should remain as some concern to momentum traders.

 

Indicator: MACD
The first swing buy signal since Q1 2019, only shows how slow this indicator can be in reaction to sharp price movements. While now a crossover “swing buy signal”, this should be monitored for confirmation of a continuation to higher prices. 

Comments from last week: The last weekly bar shows a higher low and higher high with a close towards the low of the range. Rejection at the 6200-point level has become immediate. However, last week was the follow on from 2 very strong trading weeks. Look for consolidation in the coming week. Going forward a close below the 5756-point low would signal a complete reversal with a potential retest of the 5410 level.

XJO DAILY
Price structure:
5850 will remain the daily closing level to hold in the coming week. Friday’s low close shows late week selling entering the market. A further breakdown would target the daily support level of 5535 being the original breakout point during the 4th week of May. While the Primary daily trend remains UP, price consolidation above 5850 would be very positive for further gains.

 

Indicator:  Relative Strength
RSI has moved below the key 50 and. A loss of upward price momentum would see a return to the 30 level and warn the trader of potential further price weakness.

Indicator: VOLUME
Recently daily volumes can be seen rising on down days with Volumes falling on UP days. This is typical Bear market activity. Fridays break higher with the final prices being at the low of the day has been accompanied by a high volume, suggesting Sellers closed the market and remain in control. 

Comments from last week: 5850 will be the daily level to hold in the coming week. Friday’s recovery close shows late buying entering the market. A further breakdown would target the daily support level of 5535 being the original breakout point during the 4th week of May. While the Primary daily trend remains UP, price consolidation above 5850 would be very positive for further gains.

 

S&P 500 WEEKLY
Price structure:
An opening gap on Monday saw the market trade higher to meet bearish “mid point” resistance from the previous week. Without strong news, the potential for the Index to consolidate above 2940 and below 3210 is now in play. Important support levels remain in play at 2940 and 2820.

 

Indicator:  Relative Strength Indicator
Relative Strength turning lower from above the key 50 level last week is a sign of a decrease in upward momentum, the RSI needs to remain above the key 50 level and continue to rise for current momentum to remain positive.
Look for a move below this 50 level as a signal of bearish momentum.

Comments from last week: Following the strong trading range bar into the 3210 level last week’s engulfing OP (Outside Period) remains a signal for a top being in place. Important support levels remain in play at 2940 and 2820.

S&P 500 DAILY
Price structure:
With a Monday open below 3000 followed by the sharp recovery has not followed thru to higher values.  With Fridays gap open higher only to resolve into a OPd the warning is in for the market to move lower. Daily support at 2940 remains active on further declines in the coming week. The Gap from 2 weeks ago remains unresolved as does the Gap from February 2020.

 

Indicator: Relative Strength
RSI signal line has rolled higher but remains border line Bullish around the key 50 level.

Comments from last week:  Two weeks ago, the “gap open” warned of a potential short term top coming, the following trading days have set an “Island top”. The Gap down on Thursday has NOT followed through to lower prices at 2940 support with Friday closing towards the high of the range. Further consolidation would be expected at these levels above 3000 points. The loss of the 3000 point level would be a very bearish signal of further weakness.

 

GOLD – WEEKLY
Price structure:
The underlying price structure remains in a Primary UP trend. The whole world wants to be “long” Gold. There is a strong Technical picture to be long Gold at this level, however the bar last week has a lower shadow as the market probed for sellers. ( an internal bearish signal) The key so-far will be a Weekly closing price over the $1747 level.
Last week candle remained a shorter range than the previous week also pointing to slowing momentum. On a breakout the Trader should be cognisant for a potential “Bull trap” scenario.

 

Indicator:  Relative Strength
The Relative Strength Indicator has failed to make a new high in line with the underlying price, an sign of further consolidation as the RSI tracks sideways.  However, the indicator remains over the key 50 level signaling positive price momentum, but as the trajectory steepens lower a cross of the 50 would only highlight lost upward momentum should the market move below $1690.10. 

Comments from last week: The bigger picture for this consolidation area below $1747 is for further consolidation! Following last week’s inside range, IPu. Only a close over this now “key level” of $1747 would usher in further buying. The Weekly price chart is at risk of breaking down towards the $1610.90 level

 

AUD GOLD  DAILY
Price structure:
This price Chart is the USD Gold priced into Australian Dollars, a weaker AUD will lift the price. Conversely a stronger AUD will potentially weaken the AUDXAU price even as the USD Gold price rises.
This has significant impact on the day to day prices of the Australian based miners.
A new higher low in place with Fridays impulsive move, also the completion of a Bullish pivot has to break resistance at $2563 to remain on track to retest the March, April, May highs.
This week look for a close over $2563 as a bullish signal.
 

Indicator: Relative Strength
With the RSI mow rising a potential cross over of the 50 level is now possible, this will only be a reflection of higher underlying prices. However it is moving in the right direction.

Comments from last week: Last week showed good recovery from the 2380 level with resistance of 2563 now in front for the coming week. AUDXAU remains in a Primary down trend on a weekly basis. Friday’s low close within the Daily range may signal a short-term top in place. Australian Gold stocks should be evaluated on an individual basis, this relative price weakness will flow through to the AUD miners price performance.
Relative performance of Australian Gold stock over 5 years.

 

SILVER DAILY
Price structure:
Silver is an Industrial metal and will be responsive to improving economic news.
Flag failure with a break of the tentative trend line, not a great look for Silver in the short term.
The last 4 trading periods show a potential bearish flag that would again point to a retest of the $16.00 breakout level from Mid-May.
To remain bullish silver requires a closing price movement over $18.50 in the coming days.
This type of bullish action would put the short term bear case away.
The Technical view is for further range bound consolidation at this current level.

 

Indicator: Relative Strength
The Relative Strength Indicator remains a “swing sell” signal following the divergence from price, a further move towards the 50 level would be in line with falling price, and a potential retest of the $16.50 level.

Comments from last week: A bullish flag breakout and failure has marred the potential for further higher prices. Silver enters a consolidation pattern. Fridays close below the key level of $17.50 is not a bullish sign for the short term. Only a breakout over the recent high at the $18.50 resistance level in the coming 2 or 3 days would set this up for further gains.

AUSTRALIAN VOLATILITY INDEX
Current overall volatility levels remain the 2nd highest since the GFC.
It should concern traders the Volatility remains at elevated levels while the equities market is in a bullish phase, clearly the expectation of future price weakness is being priced in.
With the weak closing prices in the Major XJO index on Friday, underlying volatility values rose to close at 24.25, pointing to the potential for further weakening of equity prices.
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.
An XVI over “13” is generally bearish for equities.

Comments from last week:   The significant move higher is a further Bearish signal for equities; however Volatility levels can change quickly, and the trader is reminded to follow the tape.

 

USD DOLLAR INDEX
Price structure:
Further gains possible as the USD Index works toward resistance at the 98.45 level in the coming days. The current daily range is strong with a high close on Friday boding well for further gains in the coming week. A falling AUD as the result. The key bearish level is a move below 97.00

 

Indicator:  Relative strength
RSI shows a sharp turn higher in line with underlying price making larger range days. This remains a strong signal for further gains back towards the key 50 level.

Comments from last week:  Thursday’s completion of the pivot reversal saw further follow through higher on Friday, a good signal for further gains in the coming days, the flow on effect may see a lower $AUD and an improvement in the Australian dollar Gold price AUDXAU. ( an improvement for Aussie Goldies)

 

WTI  CRUDE OIL
Price structure: This commodity is news driven
Last week saw strong price recovery into the Friday close. Resistance remains at $42.00, with current underlying momentum a further price gain would be expected to fully close the current GAP and break above $42.00
In the coming week a close above $42.00 would place the next resistance level in play at $50.00 – $50.60
Last week’s low of $34.36 will be the point of weakness on any price retectement and put the $29.20 support level back into play.

 

Indicator: Relative Strength
The key 50 level has now been crossed as a sign of increasing momentum. Look for the RSI to remain above the 50 level. RSI is a momentum indicator, so a reading below 50 would signal weak momentum and the potential for price to retest the key 29.20 breakout level.

Comments from last week: The $42 level will be the key “test” again in the coming week. Last week reversal remains higher than the previous weeks low, a sign of potential consolidation under the now key $42.00 level. A trading range between $29.20 and $42.00 would be an overall bullish sign for the commodity to breakout higher in the coming months.