Black and White Technical Report: The Week Beginning 25/05/2020

Australian Indices continue to look for direction, with further consolidation last week.
US Indices, trading at current levels, are looking to breakout higher.
The challenge for investors and traders is the underlying fundamentals do not support higher values.
From the technical picture the underlying relative strength (Momentum) on longer term weekly and monthly charts is declining, this infers large numbers of Buyers are unwilling to defend higher prices

Gold in Australian dollar terms is posting a lower high with a potential retest of the long-term trend line underway.

West Texas intermediate current continues to higher prices with major resistance at USD $42.0.

 

XJO WEEKLY
Price structure:
Last week saw another move over the 5544 level, however the close remains below this level as selling continues. The XJO remains in a secondary consolidation within the corrective move lower.

This type of secondary consolidation can precede a new leg lower with a possible retest of the lows.
Only a weekly close over 5544 would negate this view.

Indicator: Relative Strength
Relative Strength remains benign below the key level of 50, indicating low positive momentum, should the index test 5544, a reading over 50 may indicate bullish continuation.

 

Indicator: VOLUME
Close inspection of the Volume will show higher volume on the down weeks and lower volume on the positive weeks.

Comments from last week: Last week’s small high / low range and failed retest of 5544.0, coupled with the small range between open and close saw the 5410 level become the critical reference level for this week. Only a significant movement over 5544.0 would bring in the FOMO buyers. The risk remains of price weakness in the coming week.

XJO DAILY
Price structure
The daily technical picture for the XJO remains “weak”. However the developing ascending pattern with 3 lows in place has the potential to breakout higher. A solid close over the DAILY resistance of 5535 is required to confirm any price bullishness. Traders would monitor the  4 major Bank stocks and the larger industrials Wesfarmers along with material stocks BHP, WPL, RIO for bulish price action driving the index higher.

Indicator:  Relative Strength
RSI has moved above the key 50 level with last weeks sharp mid week up turn rolling over. Any further loss of upward momentum would see a return to sub 50 levels and warn the trader of impending further weakness.

Indicator:  VOLUME
The recent daily volumes can be seen rising on down days with Volumes falling on UP days. This is typical Bear market activity as the overall volume dries up as the market reaches resistance. Fridays positive close on relative high volume, is unusual and should be treated with suspicion as Friday closed off the high of the day.

Comments from last week: The daily chart of the XJO Index remains within a developing price channel. The current consolidation of last week in the form of a bullish flag has the potential to breakout higher, but requires a large range day or days to convince the Bears to give up. Weakness would target 5000. Price strength could be seen with a breakout over the Daily resistance level of 5535 points.

S&P 500 WEEKLY
Price structure:
A new weekly high close above 2940 resistance a sign of price strength? The small range bar last week is not a bullish signal while at this consolidation level. Line #9 from 2 weeks ago continues to play out.

 

Indicator:  Relative Strength Indicator
Relative Strength turning lower from above the key 50 level last week is a sign of a loss of upward momentum, currently the turn higher in minimal as the index value consolidates at these levels.


Comments from last week: The Weekly bar classified as #9 from the “Haguro” Candle method (see note) suggests an end of the upward movement, the current resistance of 2873 remains in place. A break (down) below 2820 would be a very bearish signal for further weakness. This current price structure remains a secondary movement within a bear market..

 

S&P 500 DAILY
Price structure:
Daily price ranges remain in a consolidation below the March 2020 price Gap following last Mondays opening Gap higher. Further price gains may fill this higher gap. A daily closing price below 2940 would be signal for the lower Gap to be filled.

 

Indicator: Relative Strength
RSI from last week’s bearish divergence intermittently turned higher, the signal line has rolled lower again as short term bullish momentum has been lost. Without a further breakout over 2940 points look for a further bearish movement below 50 in the coming week.

Comments from last week:  Last Thursday’s Bullish piercing range was met with a gap down low opening on Friday, while that remains a short term buy signal the overall development of the two bearish flags remains a weak price structure.

GOLD – WEEKLY
Price structure:
The underlying price structure remains in a Primary UP trend.

Failing momentum with a Fake out movement (FO) last week, setting Gold up to test lower prices in the coming week. The Pennant breakout from 2 weeks ago has failed to follow thru with higher price last week. Consolidation at these levels would be the best outcome in the coming week. $1750 will remain significant resistance. (see RSI note)

Indicator:  Relative Strength
The Relative Strength Indicator has failed to make a new high in line with the underlying price making a new high, an early sign of potential consolidation as the RSI tracks sideways. However the indicator remains over the key 50 level a sign of positive price momentum. 

Comments from last week: Last week a text book breakout, with a new closing price high, a very bullish move is currently underway. USD Gold remains a considerable distance from the long term trend line, this two inferences, 1. The primary trend is accelerating, with the risk of an exhaustion top, 2. A price breakdown below $1610.90 may see a retest of the long term trendline.

AUD GOLD DAILY
Price structure:
A fourth high now in place as an outside period (OP). The developing ascending 1,2,3 lows is a good sign the consolidation is becoming complete. With a “3 bar” triangle now in place one move higher could be expected in the coming week.

Australian based Gold miners will make longer term price moves around this underlying chart of Gold in $AUD.

Indicator:  Relative Strength
A sign of overall positive momentum when the RSI remains above the 50 level. The RSI is now indicating weak price momentum, a move higher would only be reflective of the underlying continuing higher. The long overall decline of of concern.

Comments from last week: In line with the USD gold price moving higher and a weakening $AUD the current bullish flag breakout has the potential to set new highs over $2765.0. This daily view has now entered a new up trend, Friday’s expanding range a sign of strong momentum. Immediate continuation is required to remain short term bullish, along with a weakening or stable $AUD.

SILVER DAILY
Price structure:
Good follow through higher from Last weeks impulsive move through the $16.50 resistance level. With the retest of this level on Friday, the high close for the session is a bullish signal for a move back over $17.50.

Indicator: Relative Strength
The Relative Strength has turned sharply higher, from below the 50 level. This should be monitored in the coming days for a move higher in-line with further Bullish price movements, a further move below the 50 level would be in line with falling price.

Comments from last week: With $14.75 support continuing to hold, Friday’s strong momentum move ( impulsive) is a strong signal for further short term gains.

Underlying Primary trend is now UP.

The whole price structure from early March now a significant bullish “cup and handle” pattern.

AUSTRALIAN VOLATILITY INDEX
Current volatility levels remain the 2nd highest since the GFC. The recent statistics around flattening the curve had allowed this Volatility measure to retrace lower.

2 weeks ago the level began to rise in line with loss of Bullish sentiment in the equities market.

And although the reading is lower this week, the most important observation is the value has maintained a relatively high reading currently at 24.4, reminding the trader this indicator has the potential to move higher in the next week. A bearish signal.

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.

USD DOLLAR INDEX
Price structure:
While a lot of commentary is going on around the USD printing and USD debt. The DXY a measure of the USD against a basket of other currencies only tell a continuing picture of consolidation below 101 and above 98.45. Last weeks pivot point reversal suggest a retest of 101 underway.

 

Indicator:  Relative Strength
Relative Strength had remained just above the 50 level, however the sideways movement is a continuing sign of weak momentum as the indicator turns flat to lower.

Comments from last week:  DXY remains range bound, although the approach to the higher level 101 is looking imminent. Monday’s low opening by the sellers is a concern and not a bullish development.

WTI  CRUDE OIL
Price structure: This commodity is news driven.
The $29.0 resistance level has been disregarded without any retest, the continued movement over the past 4 weeks, may exhaust into the higher GAP at $36.0. This would be the potential level for short term rejection for a retest of the $29/$30 level.   

Indicator: Relative Strength
The developed picture in the RSI is a Bullish divergence Buy signal, a weekly cross of the 30 level has now confirmed. The key 50 level has now been crossed as a sign of increasing momentum.

Comments from last week:  Last week saw Crude make a nice follow through and break above the key $29.00 level on a strong close for the week. Further price gains into the February Gap are possible. Traders would look for a successful retest of the $29.0 level on any price weakness in the coming days.

Resistance remains at $42.00.