Black and White Technical Report: The Week Beginning 28/09/2020

Could it be the stars are aligning for the October Bullish run across all Indices’, with the US and Australian market putting in key reversals last week, this becomes the play for the week.

Contrary to popular opinion October is a year on year 7/10 bullish month, often referred to as the “Bear killer” month. Statistics show November is a more bearish month to be aware of. Volume distribution patterns remain a concern for the bigger price structure picture.

Of first concern is the continuing health pandemic  now threatening a significant 2nd wave across the UK, Europe and some US states, this may keep upside volatility subdued in the coming weeks.

 

Precious metals remain in under pressure as sellers enter the market, Silver tests the long term trendline, with Gold risking a retest of earlier breakout levels.

 

XJO WEEKLY
Price structure:
Last week posted an “outside period” up close, a bullish signal for further gains in the coming weeks.
The low price of the week although not reaching the support level of 5725 is deemed to be complete, confirmed with the high range close of the bar.

The Index still remains within the trading range with 6200 as significant resistance.
The high range close of last week is a signal of further gains.

Key stocks to watch are the 5 banks ANZ,CBA,NAB,WBC and MQG along with WES, and WOW.

 

Indicator: Relative Strength
Relative Strength, has turned higher to meet the key 50 level, this is a good sign of improving upside price momentum in the coming week.

Further consolidation in the price chart below 6200 may this this dip further below the key 50 level targeting the 30 level.

 

Indicator: MACD
MACD enters a swing “Sell” signal. This week has continued with a further dip in the fast line now crossing the slow signal line, only reflecting the slowing momentum. The impending full cross over would be the Sell signal. It should be acknowledged this indicator is very slow to react and may track sideways in the coming weeks.

Comments from last week: The week resulted with an inside range (from the previous week), this is where the market comes into balance. Coming into balance, but below the midpoint following a sell down.

This remains a Bearish picture for a potential retest of the 5725 level.

This type of trading range when the low (5725) is once again tested may be the precursor to a further Bull run, however trading ranges can take many months to resolve.

 

XJO DAILY
Price structure:
Last Wednesday provided the “pivot reversal” from the retest of 5725 support. Last Fridays high close is a good signal for further gains early this week. 6056 is the first short term resistance level to test and cross in the coming days. The last week of September year on year has high correlation sell week. This is often followed by a Bullish October. 

 

Indicator:  Relative Strength:
RSI has turned higher again in line with the chart price movement putting in a solid momentum reversal signal

Indicator:  VOLUME
Volumes continue increase on the “down” days, this is of concern as it suggests distribution not accumulation. 

Significant volume increases need to show on the “up days” to confirm the longer term bullish view. Fridays high close was not supported by strong volume.
This will need to improve in the coming days to maintain a Bullish volatility breakout.

Comments from last week:  Last Wednesday saw the breakout from the Wedge pattern, true to form the location of the pattern is not ideal and prone to failure. The real issue here is the developing broad distribution top, the volume increase on down days is the giveaway (disregard the ETO expiry volume). The lows of June 2020 may well be tested in the coming days. The key observation will be if the daily ranges start to expand to the downside.

 

S&P 500 WEEKLY
Price structure:
The week completed with a strong close “hammer bar” this is often the marker for a further bullish swing higher.

The S&P 500 has made an important retest of the 3200 level and has closed the “gap” from 7 weeks prior.
This is a great setup for further gains in the coming week. 

It should also be noted Tech stocks have regained some ground in the past week.

The only caveat is the concern around the ongoing health pandemic dampening general market sentiment.

 

Indicator:  Relative Strength Indicator
Relative Strength turning lower is simply a reaction calculation of the weeks price range. There is not much to glean from its position as the prior move was not over the “70” level. A move below the 50 level is a signal of renewed bearish momentum.

Comments from last week: Two outside ranges in 3 weeks shows the battle between the buyers and the sellers, both remain defiant. An important retest of 3200 is underway, observed as the weekly closing price remains at the low. This is not a bear market signal (yet) but an important retracement in the advancing Bull trend. 

But overall this market needs some strong economic news flow soon to keep this bullish commentary intact.

S&P 500 DAILY
Price structure:
Several factors support this current pivot point reversal. The increased price range over the Thursday bars range.
This also confirms the potential completion of the a,b,c reversal pattern as a retest of the 3200 level and the GAP fill.

Historically in the S&P large range reversal bars are consistent with further gains ie the June reversal and the earlier Mid May reversal points.
Most important is the RSI divergence signal, a highly reliable indicator for a change in directional volatility. 

This market may remain highly volatile going into the November US elections.

 

Indicator: Relative Strength
Relative Strength has again turned lower and at risk of crossing the “30” level. Traders should be aware that the RSI crossing the 30 level does not generate a buy signal. As this type of price consolidation can last for many months.

Comments from last week:  The past 9 trading days remain within a tight range, with the “c” wave of the structure to complete. The small price Gap above 3200 would be the first downside target in any further bouts of selling.

The support / resistance level shown at 3350 will remain the marker for the first potential recovery rally. This would be strong signal if accompanied by the RSI moving over the key “50” level in the coming days (unlikely)

 

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

The whole world still wants to be “long” Gold, until they don’t.

Gold has staged a significant breakdown.

The break of the short term trendline with last weeks long range bar is a very bearish signal for further declines.

The current weekly close remains on the $1850 “midpoint” of the July impulsive range.

This is a good signal for interim support however the range of the weeks down close bar is strong and signals further declines.
The next key support level is $1764, this also coincides with the Ichimoku future cloud support levels. ( shown last week) 

 

Indicator:  Relative Strength
Relative Strength turns lower to move below “70”, this can be monitored to remain above the “50” level, as the instrument may find consolidation at this “midpoint” level.
Further selling below last week’s low may see a complete loss of positive momentum. 

Comments from last week: Gold continues to consolidate below closing price resistance at $1964.0 and support at $1939.65. As the consolidation drags on (and can last for many months) a retest lower would be the expedient outcome to test the resolve of the long-term holders. 

When applying Ichimoku the future cloud and Kijun-sen (green) are showing major support at $1760.0, while price sitting on the Tenkan-sen line (blue) is at risk of breaking lower

AUD GOLD DAILY
Price structure:
The AUD Gold price a factor of the $USD Gold price against the $AUD cross rate has a significant impact on the local producers.
Many local producers are showing significant reversals and may test lower prices.
The current retest of the $2610.0 level has found some support but there is not a key bullish reversal signal to be found.
Further consolidation is in progress, this may prevent the local Goldies from finding any buyer support.
 

Indicator:  Relative Strength
With the RSI now falling, the crossover below the 50 level is a signal upward momentum maybe at an end in the short term.
Traders would monitor this indicator for a swing higher in line with any price gains to confirm a valid buy signal, without this confirmation the current slow momentum is at risk of slowing further.

Comments from last week: Australian listed Gold producers have not been able to find a consistent bid, a reflection of the underlying uncertainty in the AUD Gold price. A further move lower would be expected to complete the “c” wave.

$2600 remains the major support level. Until this chart, a reflection of the Australian Dollar price of Gold makes a significant upturn the local producers will only see lower prices.

 

SILVER DAILY
Price structure:
The significant breakdown from support of $26.18 has met further selling to retest the long term trendline. Referred to last week as the weaker holders looking for opportunity elsewhere.
Last Thursdays bullish hammer bar has failed to follow through higher and must be resolved in the next 2 trading periods  to remain a potential bullish reversal signal.
The important support level of $19.74 is now in play should this trendline support fail in the coming days.
This price target is in line with the potential weakness to come in the Gold contract.
Silver equities will remain under pressure until this contract finds some significant price support.

 

Indicator: Relative Strength
With RSI now below “70” and below “50” the current “dip” below 30 shows the very weak price momentum underway.

Comments from last week:  Silver has now shown a well defined price channel between support at $26.18 and resistance shown at $28.50. Two very strong down days in early September have not been resolved with the recent price consolidation in the lower half of this price channel. Over time the weaker holders may find better opportunity elsewhere.

 

COPPER DAILY
Price structure:
With Global recoveries under a Covid19 cloud, copper has been the subject of profit taking following the breakout over $2.98 – $3.0 level.
The current retest of the breakout level is an important development in the underlying PRIMARY UP trend.
This level must now hold and the short term trendline must hold in the coming week to remain a bullish development.

 

Indicator: Relative Strength
Relative Strength has moved strongly over the 50 level and now 70 level in the past 12 weeks. The current dip below the 70 level is in line with the price decline however the higher levels only continue to reflect the current strong upward price momentum, not necessarily an over brought sell signal.

Comments from last week:  On the fundamental side Copper remains at risk of a supply shortage. The Weekly chart of Copper remains very bullish for further gains into the $3.20 resistance level. Good range and a high close for the week, show the buyers in control. The potential for an extended move exists as the retest of 2 weeks ago looks complete with this weeks new high in place.   OZL, Metals X and Orocobre the ones to watch.

AUSTRALIAN VOLATILITY INDEX
The Australian volatility Index has declined in the past week as the 2nd wave Covid19 situation in Victoria shows signs of coming under control.
Coupled with the current Government stimulus underway here and in Europe and the US a further decline in this index would remain a bullish signal for Australian equities. 

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.   

Comments from last Week:   Volatility remains relatively high, but has settled into a range as the Victorian Covid situation looks to be resolving itself. And leads from the US indices may indicate a more orderly decline rather than a further correction. These current levels still remain bearish for equities.

 

USD DOLLAR INDEX
Price structure:
USD dollar strength has placed pressure on the precious metals sector and the FX markets.

Last week saw a strong rally out of the consolidation area in a highly volatile move to test the long term down trend line and see last Friday close over this marker.

With the current “higher low” in place the DXY is now in a daily UP trend and should be monitored for further gains in the coming days.

Indicator:  Relative Strength
Bearish divergence has been negated with a very strong resurgence in upward momentum. An impending crossing of the 70 level would be a further bullish signal for this FX Index.
This is at risk of placing further pressure on the precious metals sector.

Comments from last week:  Solid resistance remains at 93.75 as this 3 month sideways consolidation continues, a breakout either higher or lower below 92.10 will be decisive as these low volatility consolidation events lead to high volatility movements.

 

WTI  CRUDE OIL
Price structure: This commodity is news driven around supply demand.

The pivot bar from 2 weeks ago has not played out into further gains, importantly for now the $35.81 support level remains in place.
Last week inside range is a good development but requires an immediate breakout higher, with this type of confirmation this contract has the potential to enter further consolidation period below the key $42.00 level with the $35.81 level as support.

 

Indicator: Relative Strength
RSI has made a sharp recovery over the key 50 level, a very good signal of increasing positive price momentum and should be monitored around these levels.

Comments from last week: The potential sell signal has been avoided in the reversal from the retest 2 weeks ago of the $35.81 level. The current “pivot point” is a bullish signal for further gains. $42.00 will remain the first resistance level and the level to hold should a breakout occur.