Let the charts do the talking.
Important reversal signals are showing within the Indices, this week will decide if the current rally beginning last Friday is a dead cat bounce or the beginning of markets setting a support base for further gains.
Macro events may place markets into a holding pattern until some clarity emerges.
Although the US markets moved higher on low volume last Friday, a further retest of the lows may take place, this would look like consolidation along with current levels.
WTI Oil, Gold and Silver have retraced from exhaustion highs as buyers take profits following a sharp retail-led rally through resistance levels.
A bearish pivot reversal saw the week finish at the lows in the attempted retest of 6900. For many months last year, I argued the Index mat be putting in a broad top, however, this current breakdown may show further consolidation between 6900 support and 7200 resistance. The important observation is no new money is entering into the market with the ultimate risk of money leaving the market leading to a further breakdown in price.
Relative Strength has turned lower, as the reading has moved away from the 50 levels, indicating a loss of positive momentum, the next move in the RSI will be telling should it move higher above the 50 levels. Further price weakness will see the RSI turn lower. The Relative Strength Indicator reflects price momentum the current weekly closing price still reflects overall slowing momentum.
Comments from last week: 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.
With the impulsive price movement followed by the “inside day” (Friday) the move lower may have paused but may not be over. A further breakdown lower from the “Inside day” low point will give some direction for a retest of the 6758 level. Resistance levels are now 7216 and will be the level to monitor in the coming days, a further close over this level would be Bullish.
The Relative Strength Indicator (14) reflects the underlying price momentum has moved lower from above the 50-level indicating a shift to slowing momentum. A cross below the key 50 levels would indicate a loss of positive momentum.
Trading volumes have been relatively high during the past week leading to Friday’s lower volume on the short retracement higher, volume will be monitored for any further increase as a signal of sellers entering the market.
Comments from last week: The retest of 7370 is complete for now. 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.
The S&P 500 displays an important reversal pattern with the price range of last week setting a new low from 5 weeks ago. Completion of an a,b,c movement will be confirmed with a higher low bar in the coming week. The high close of the low to the high part of the range is bullish for further immediate gains, however, by Weeks end, a close over last week’s high would be needed to set a further bullish outlook.
Price movements are considered positive with a reading above the 50 levels, with this reading below the 50 levels the Index has accrued more loss points on average than gained in the lookback period of 14 (weeks), the current short move higher is a positive outcome. The potential for an accelerated move lower remains as momentum remains to the downside.
Comments from last week: The S&P 500 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.
The daily chart of the S&P 500 shows the significant “Gap open buy” signal as the market gaps lower but finds immediate buyers following the recent decline, this traps the short-sellers into covering their positions (buying) adding to early buying momentum. The follow-through on Friday remains positive with 73% of equities showing again for the day. The pivot point reversal is a significant reversal as the price closed over the 4372 level.
Relative Strength Indicator (14) has turned higher and remains below the key 50 levels. A continued lower close below the 50 levels 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 levels during this period only reflects the underlying market sentiment.
Comments from last 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. However, the Daily 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 Downtrend.
As discussed last week the 13243 level is an important target this was reached during the past week. The “Gap open buy” signal has also followed through to set a pivot point reversal last Friday, also with an important closing level over the 14076 resistance level. Not often found, the Recent price structure has completed a 5 wave down. The third wave is the longest, the fourth wave the most convoluted and the fifth wave is the sharpest move.
Relative strength has turned higher but remains below the key 50 levels, negative price momentum on the 14 days lookback period. The overall decline in the Relative strength from the November highs is now following through with weaker prices. This should now be monitored for a move over the 50 levels.
Comments from last week: The long term tentative (two touches) trendline is currently being tested, should 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.
The strong spike higher is an indication of late retail buying followed by profit-taking from the earlier long positions. High price rejection is complete with the price moving over the earlier resistance level of $1916.40 and closing back inside this level rejection of higher prices is complete. Last week’s closing level towards the $1876.90 level indicates further selling following the rejection. This is not bull market activity. A closing price below the $1876.90 level would simply target the long term Weekly trendline below $1834.0
A bearish divergence signal has been confirmed with the indicator turning lower from above the 70 levels a second time. Price momentum has rolled lower, the indicator remaining above the 50 levels will be the critical observation this week.
Comments from last week: 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.
The Daily price action displays a strong rejection of prices above the $25.40 level with the final close for the week below the $23.73 level. The Outside period down close (OPd) is a bearish signal and has a very high incidence of marking major turning points in price direction. With the price is currently backtesting the down trend line breakout, a further close below this level will be the retest of $23.50. Silver remains within a Primary downtrend.
Current Relative Strength is moving above the 50 levels and now turning sideways shows price momentum is simply fluctuating, typical of consolidation patterns. A continuing move above the 50 levels into the 70 levels would be very bullish in the short term.
Comments from last week: 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.
Along with the underlying $USD Gold significant rejection of higher prices has taken place. The closing price below the $2712.0 level has set a Bearish pivot point following last Thursday’s shooting star rejection of high prices. The rejection and loss of momentum in the XAUAUD price will play through into the local equities. NCM,SBM,RRL,NXT.
Relative strength has turned lower from below the 70 levels and remains above the key 50 levels. With the loss of positive momentum, Relative strength may track sideways during this potential consolidation period.
Comments from last week: 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.
Given the turmoil in commodities during the past week, HG Copper has remained relatively stable, this is a good sign the current market turmoil may not flow onto a solid downturn in economic activity. The $4.50 level now remains the go-to level in this weekly price action with the $4.33 level remaining as the current support level.
Current readings swing above and below the 50 levels reflect the current consolidation underway. The key, for now, is the RSI remains above the 50 levels as a reflection of ongoing and any positive underlying positive price momentum.
Comments from last week: 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 the 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 the market remains above the significant support level of $4.33.
Forward pricing of PUT options remains on a high skew to the current pricing. The market is paying the highest prices since Q4 2020 prices for forward protection. The outcome is Bearish pressure on local equities.
The XVI is the difference between the 3-month forward pricing of ETO Options against the 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: 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.
Solid rejection of the 95.75 level resulting in Friday’s Inside period down close (IPd) below the lower resistance level of 96.93. The USD Index remain within a well-defined price channel with the current price direction moving towards the lower level of 95.70. The underlying price trend remains UP.
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 levels should move higher, a reading towards the 70 levels would indicate very strong positive price momentum.
Comments from last 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.
This commodity is highly news driven by supply-demand.
In this report, I mentioned many times WTI looking to target US$100bl. The WTI price contract has set a “shooting star” rejection bar following a test of the $100 level. This type of rejection often follows through into lower prices as profits are protected. Further price weakness may see the $84.25 level tested in the coming week. The underlying PRIMARY TREND is UP.
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 and remaining above the 70 levels is not a signal of over brought as the reading can remain strong for many weeks.
Comments from last week: 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.
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