Black and White Technical Report: The Week Beginning 28/12/2020

The holiday period will show low trading volumes for most of January. With XVI volatility readings moving to 12 month lows, the Christmas rally should see across the board higher prices for Equities and Commodities. 

 

Major US indices should see further consolidation leading into the Presidential inauguration in early January.

 

Gold and Silver remain with bullish patterns with further upside expected as the $USD fails to find buyer support.

 

XJO WEEKLY
Price structure:
With a significant drop in underlying Volatility ( see XVI below ) the market is poised to move higher on light volumes. Consistent retesting of the 6740 resistance level without any meaningful retracement lower suggests good buyer support. A weekly closing price below the 6585 low of last week would signal a reversal, this is yet to play out.

Primary Trend remains UP.

 

Indicator: Relative Strength
The RSI indicator has remained over the key 50 level, however now showing a slowing advance as the indicator rolls further sideways. Combined with the Fake out signal in the chart, consolidation remains the preferred outcome. But overall the RSI remains a very good signal of Weekly improving price momentum.

 

Indicator: MACD
MACD has moved to a swing buy signal, again this highlights how slow this indicator can be in a fast market. It should be acknowledged this indicator is very slow to react on a weekly basis and may continue to track sideways in the coming weeks as it did during 2019.

Comments from last week: Last week marks the 3rd attempt to cross 6740 resistance level. The bearish #3 bar seems to be playing out. Without an immediate move higher the market is at risk of further consolidation under this important resistance level.  Should the market close over 6740 a retest of the 7197 point level would be imminent.

XJO DAILY
Price structure:
The Daily chart of the XJO continues to develop into a small trading range, last weeks 6585.0 point low is the key daily support level, A daily close below this level would suggest a test of 6510 is underway. Traders should be aware the holiday season to mid January provides only light volumes thru the market, with only light institutional sellers the Index may find support as key weighted stocks ANZ, NAB, CBA and WBC along with WES and CSL and APT continue to hold recent gains.  

 

Indicator:  Relative Strength
Last week this bearish momentum signal continued developing, and the coming week may only confirm the Relative strength has further developed a Bearish Divergence signal, the price has set lower price highs inline with the RSI again moving below the 50 level.

 

Indicator:  VOLUME
Volumes are traditionally light during this holiday period, so not that much can be read into this underlying indicator. 

Comments from last week:  The “pipe reversal” a very strong short term signal for reversal is now in place. The daily chart of the index is now developing a consolidation range between 6510 support and 6730 resistance.  Should further price action develop into a “bearish rising wedge” ultimately a retest of the 6056 level would be in play.

S&P 500 WEEKLY
Price structure:
Throughout 2020 may key reversal signals have failed to follow thru lower. 

Last week again the Index posted a #3 type of range with the open close in the high part of the range, this often has a follow thru lower in the following 2 weeks. How-ever with markets fully supported by US Federal reserve liquidity injections this signal has failed over and over. During the short US holiday period and US presidential inauguration, further consolidation would be expected.

(Relative Strength remains supportive of further gains.)

 

Indicator:  Relative Strength Indicator
Relative Strength remains above the key 50 level and currently remains a good signal of continuing price momentum. The RSI now needs to continue to move towards the 70 level as a signal of strong momentum. It should be acknowledged the RSI has remained above the 50 level for the past 6 months.

Comments from last week: The price range “low to high” of the Weekly chart are getting shorter, although a new high has been made, the lower shadow of the weekly bars last week and the week prior indicate “selling without urgency”. The S&P 500 may have a short term top in place. The first support in retracement is 3400.The underlying Primary trend remains UP, as the chart displays 7 weeks of advancement without a meaningful retracement.

S&P 500 DAILY
Price structure:
The daily chart remains one of consolidation. Of note is last Mondays “2nd retest” of the 3636 level. The loss of price momentum ( see RSI note) is holiday related with the market continuing to consolidate. This chart requires a daily close below 3636 points to signal a reversal pattern. A further close above 3726 would send a very bullish signal to market participants, with short coverings, further gains would be expected.

 

Indicator: Relative Strength
Relative Strength has turned lower, within the structure of the RSI there remains the clear signal for the Bearish divergence signal to play out, however the RSI should be monitored for a movement below the key 50 level as a loss of upward momentum to confirm divergence.

Comments from Last week:  Last Friday’s OPd (outside range) is a high potential marker of a turning point within the next 3 trading days. Support at 3580 would the target area in a retracement move. This is not a signal for a bear market, however markets do need to retrace and find support  to confirm the sellers are done.

 

USD Spot GOLD – WEEKLY
Price structure:
Gold remains one of the better technical charts with clear support and resistance levels playing out. Currently the $1855.0 level has provided price support. Further gains would confirm the a, b, c pattern has played out. The inset Daily price action shows an inverse head and shoulder pattern setting up for a bullish breakout with he “retest” of the neckline complete.

 

Indicator:  Relative Strength
Relative Strength turns higher and crosses the key “50” level. This is a key indicator of “positive” price momentum, a continued move high would show higher positive price momentum both in the Daily and Weekly charts.

Comments from last week: A very strong outside range last week sets the course for higher prices. The close above $1855.00 is a very strong signal for further gains as the range of the down close bar that tested $1764 has been overcome with a close last week over the high. It could be considered the a, b, c corrective move is complete as last weeks bar confirms a pivot point reversal. Resistance remains at $1970.

 

AUD GOLD DAILY
Price structure:
This chart remains a major headwind for local Gold producers. The strong Australian Dollar maintains pressure on operating margins. There is nothing inspiring about this price chart other than more consolidation ahead. Primary trend remains DOWN.

Smaller Gold plays remain dependent on news flow and drilling results.

 

Indicator:  Relative Strength
With the RSI turning higher but remains below the key 50 level showing improving momentum. This indicator has swung around below the 50 level since August. This momentum indicator needs a continued swing higher over the key 50 level in line with any price gains to confirm a valid buy signal.

Comments from last week: An improvement in price, however the structure remains as a bearish flag with the potential to break down for a retest towards the $2400 level. This will limit potential upside for Australian Gold producers in the near term.

SILVER DAILY
Price structure:
Last week saw a significant price swing in XAG with an OPu (outside period) set last Monday. This may take some time to resolve as both the Buyers and Sellers experienced a volatile 10% daily swing in price. Traders would look for a close over the $26.00 level to confirm a new breakout towards $27.70 with $30.0 remaining the primary target. Silver has entered a new Daily UP trend  

 

Indicator: Relative Strength
Relative Strength has turned sharply higher in line with the underlying price movements and remains a good signal for further momentum gains.

Comments from last week:  From a potential breakdown to strong rally to retest the $26.00 level. The short range from last Friday shows light selling. Silver has the potential to break through this $26.00 level to test next resistance at $27.70. A further breakout of this consolidation range target $30.00

COPPER DAILY
Price structure:  Inventories under pressure.
The weekly close over the $3.47 has succumbed to a retest of this important level last week. The price structure remains very Bullish for further gains in the coming weeks. The $3.47 – $3.50 levels will remain the significant support level to watch in the coming month. The next resistance level shown at $3.80 remains the current target for this very strong move underway.

Indicator: Relative Strength
Relative Strength has moved over the 70 level again underlying the strong momentum move underway. An early BEARISH divergence signal has failed so-far, this will still be monitored in the coming week. Further confirmation of a top will be shown if price moves below last week’s low around $3.48 and the RSI moves lower inline. 

Comments from last week:  The continued strong momentum move in Copper targets $3.80. Last week high close suggests immediate follow through the lower shadow of the last Candle may considered the “retest” of the breakout. However this is an extended price move following 7 weeks of price gains. Traders would look for a short retracement to potentially retest the $3.47 level again.

AUSTRALIAN VOLATILITY INDEX
The sudden decline in Volatility could be viewed as a data error, however with the COVID-19 Vaccine now being rolled out, the potential upside in Global economies has a dark cloud removed. Within Australia our economy has emerged from recession with confidence coming back into the business sector. The XVI reading is now “complacent”, this should continue to show in equity gains.

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: The rise in underlying Volatility keeps the Cap on immediate gains in equities as forward risk is now being priced in. While 15.29 is not an extreme measure, the observation is that the price of risk cover (forward PUT Options) is rising on buyer demand.

 

USD DOLLAR INDEX
Price structure:
The rejection high of last Monday has not been breached in the following trading days with price remaining below the 90.66 resistance level. The whole price structure remains very bearish. This will be supportive of a higher Australian dollar, placing margin pressure on the local Gold producers. 

Indicator:  Relative Strength
While the RSI has now moved over the 30 level the indicator remains below the key 50 level. Traders would look for an RSI move over the 50 level to suggest a momentum move higher is underway, this remains unlikely.

Comments from last week:  Again key support of 90.66 has broken in this continuing $USD Bear market. To see any revision in direction a close over 90.66 is required with a continued move towards 91.66 to confirm.

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

West Texas Intermediate remains in a breakout move above the $42.0 level. Last week’s sell down was met with buyers to close towards the high for the week. A clear resistance level of $50.60 remains as the price target, only a strong close over this level would set the chart up for a retest of $61.80

 

Indicator: Relative Strength
RSI turning higher over the 50 level and now over 70 remains in a very good place for further momentum price gains. As the indicator is now over 70, this will be monitored for a potential divergence signal.

Comments from last week : West Texas Intermediate remain in a continued move higher to test the $50.60 level. As the Weekly chart has made new highs over the $42.00 level, WTI enters a new Bull market phase. A further Weekly close over the $50.60 level would put the $61.80 resistance level in play.