Black and White Technical Report: The Week Beginning 2/11/2020

This week will be dominated by the US election result, market commentary is split on the outcome for the equity and commodity markets from each candidate and volatility will rule in the coming days with potential price swings in each direction.

Traders should remember markets are based on future economic outcomes, currently the overall bias is for a continued push higher, with COVID-19 and the potential economic fallout this is the only chain dragging on bullish sentiment.

Gold and Silver remain at risk of setting a new leg down to test the resilience of longer term holders as risk off events also extend into the precious metal’s markets.

XJO WEEKLY
Price structure:
The bullish consolidation alluded to last week has failed to follow through with the expected breakout higher.
Currently the pivot point reversal is dominating the chart with the potential to retest the lower support level at 5725. Last week’s larger range is also signal for more follow through lower. See the daily chart below for more context on support and resistance.

Indicator: Relative Strength
The RSI indicates has rolled lower to finish below the key 50 level. The key observation for this indicator at this point is the reading above the key level of 50. Further consolidation in the price chart below 6200 may see this once again dip further below the key 50 level targeting the 30 level.

Indicator: MACD
MACD remains a swing “Sell” signal again this week and has continued in developing a sideways movement, only reflecting the slowing momentum. The completed full cross over becomes the Sell signal. 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.

Black and White Technical Report: The Week Beginning 2/11/2020, FP Markets

Comments from last week: An indecisive week with a narrow open and close range. The fact that the market is consolidating at the 6200 point level is a bullish sign for further gains. These types of consolidation can last for many weeks. The “impulsive” bar from 3 weeks ago dominates the current price action. Price movement back into the midpoint would be the first bearish signal for traders.

XJO DAILY
Price structure:
The daily ranges of last Tuesday and Thursday are strong and have breached two levels of potential support at 6056 and 5960. Last Friday closing on the days low may see a sharp recovery early this week, but over-all the price structure remains weak. A recovery in price will see the broken support levels as resistance levels.

Indicator:  Relative Strength
A very bearish signal with the move below the 50 level, this is the first bearish signal, the second is the breach of the 30 level. The RSI will now be monitored for a potential divergence signal in the coming days.

Indicator:  VOLUME
Volumes have been robust during the past week practically on Thursday and Friday. This seems to be a continuation of earlier distribution and short term stress. Significant volume increases need to show on the “up days” to confirm the longer-term bullish view. 

Black and White Technical Report: The Week Beginning 2/11/2020, FP Markets

Comments from last week:  Last Thursday’s “test and reject” of lower levels is the key observation in this current price action. Friday’s “inside period” shows the sellers are not in control of the short term price action. Currently this is a “buy the dip” market.

S&P 500 WEEKLY
Price structure:
The potential bullish flag has now failed with the weekly retest of 3230 support level. This will the critical level to hold in the coming week. This market is at risk of a full retest lower to 3028 in the coming weeks.It should also be acknowledged a break of this current 3230 support level will place the Index into a PRIMARY DOWN TREND.

Black and White Technical Report: The Week Beginning 2/11/2020, FP Markets

Indicator:  Relative Strength Indicator
Relative Strength turning lower is simply a reaction calculation of the weeks large price range. There is still 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: The S&P is building a Bullish flag pattern and may continue to move around the 3460 “midpoint” resistance in the coming weeks. 3230 will remain long term support on any further price declines, this level must be held for the market to remain a Bullish trend.

S&P 500 DAILY
Price structure:
The daily chart shows a clearer consolidation pattern developing between 3580 and 3230 with last week putting in a “c” wave. The important observation here is the support level as there is no evidence of a reversal pattern in the daily bars. Last Friday’s price recovery off the low is encouraging, this support level may hold given the high of the range close and above Thursdays low. The daily chart now has a breakaway price GAP from Monday to Tuesday, that will act as a target on any price recovery.

Indicator: Relative Strength
Relative Strength has again turned lower below the key 50 level and below the 30 level. This will now be monitored for a Bullish divergence signal similar to the last September divergence.

Black and White Technical Report: The Week Beginning 2/11/2020, FP Markets

Comments from last week: Intimate daily support has developed at 3420 as the past week consolidated inside last Monday’s bearish bar. A daily close above resistance at 3580 will be the key level to signal a breakout higher.  The past weeks’ small range days, a sign of low volatility week will lead to a volatile breakout. Support at 3230 will be the key level on an y further breakdown of price. 

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. The Gold price continues a larger consolidation pattern with the $1855 mid point providing support of the third time. Gold has the potential to retest the breakout level at $1764 in the coming weeks. A close below $1855 will be the first signal. But is should also be acknowledged the past 5 weeks have traded inside the second retest range of the $1855.0 level. A breakdown from this level would be expected to be sharp as this current consolidation area accumulates buyer on “support” looking to cover losses. 

Indicator:  Relative StrengthRelative Strength turns lower with a continued 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 the support $1855.0 low may see a complete loss of positive momentum. 

Black and White Technical Report: The Week Beginning 2/11/2020, FP Markets


Comments from last week: The Gold price has a significant amount of work to do before any form of breakout can be called. There are 2 key resistance levels in play $1939.65 and $1970.0 where the market has remained below for the past 10 weeks. (Hardly Bullish). The current rejection of $1939.65 is a bearish signal for a further decline, ultimately towards the long term trend line.

AUD GOLD DAILY
Price structure:
This Daily chart really paints the picture for Australian listed producers and the underlying cost of production being a major factor in the equity price. Australian listed producers equity prices will continue to be under pressure as this price structure continues to range trade. Not included in this observation are the juniors with drilling and assay programs underway.

Indicator:  Relative Strength
With the RSI turning lower, the crossover below the 50 level is a signal upward momentum maybe waning in the short term. Traders would monitor this indicator for a continued swing higher in line with any price gains to confirm a valid buy signal.

Black and White Technical Report: The Week Beginning 2/11/2020, FP Markets


Comments from last week: Further rejection at $2720 with a complete bearish “pivot point” This market continues to be range bound. Australian listed producers equity price will continue to be under pressure as this price structure continues to range trade.

SILVER DAILY
Price structure:
A breakdown below support at $23.40 and failure to hold the inner trend line has seen a new “tentative” trend line drawn. The daily Silver chart has no direction, however Friday’s pivot reversal offers short term traders some insight to a potential retest of $23.40 in the coming days. Fridays Pivot point is also a 3 bar type reversal, a highly reliable pattern.

Indicator: Relative Strength
With RSI now below “70” and below the “50” level, only suggests further consolidation in price. 

Indicator: MACD
The MACD has provided a swing Sell signal and should be monitored to remain as a sell signal. With the MACD now moving sideways this should be monitored for a further buy signal.

Black and White Technical Report: The Week Beginning 2/11/2020, FP Markets

Comments from last week:  Silver displays the same consolidation as most economic dependant metals. The current daily congestion is BEARISH and at risk of further testing the lower trend line with a further break of $23.40 support level. The key level of $26.18, if broken would be a very bullish signal, however the Bearish “pivot reversal” of 9 trading days back continues to dominate the current price action.

COPPER DAILY
Price structure:  Inventories under pressure
Last week’s observation of the RSI divergence signal is playing out to lower prices. The Pivot point reversal has pushed price back into the developing consolidation above $2.98. This historical support level will be key in the coming week/s as the short term trend line is also in confluence. The Primary Trend for Copper remain UP with $3.30 as the longer term price target. This along with consolidation in the PM sector will influence the underlying Australian producers OZL and S32.

Indicator: Relative Strength
Relative Strength has moved strongly over the 50 level and now moving back below the 70 level. An early divergence signal may be developing, this will be monitored in the coming week. Further confirmation will be shown if price moves below the current support level of $2.98.

Black and White Technical Report: The Week Beginning 2/11/2020, FP Markets

Comments from last week:  The early RSI divergence signal discussed last week may be coming into play with price rejection at $3.20. The current pivot point remains a bullish set up, however consolidation around the $3.10 level seems evident in this bullish trend. $3.30 remains the overall target in the coming weeks.

AUSTRALIAN VOLATILITY INDEX
A sharp rise in the volatility value shows the market pricing in future downside risk. The summary comments above point to the ongoing economic risk around COVID-19. A continued rise in this XVI chart will be a significant bearish signal for equities. vThe 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.   

Black and White Technical Report: The Week Beginning 2/11/2020, FP Markets

Comments from last weekA further decline in the XVI remain a slightly bullish signal for equities. It is important to note this volatility index is not pricing in higher volatility around the US elections. A move above the 22 level would be a bearish signal for equities. However a move lower is expected as news around the Australian Covid situation becomes less important.

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USD DOLLAR INDEX
Price structure:
From breakdown to a “LL” 2 weeks ago, a complete reversal to stage a trend-line breakout, such is the volatility of the $USD around this US election period. Last Thursday’s strong range is an indication of price strength and could follow through to higher values. This will have strong bearish implications for the $AUD, GOLD and SILVER. Indicator:  Relative Strength
A complete breakdown of the Relative strength to move below the “50” level, the current swing lower is a significant implication for price. What was a bearish signal 2 weeks ago, is now confirming further price strength with a strong move over the 50 level. 

Black and White Technical Report: The Week Beginning 2/11/2020, FP Markets

Comments from last week:  From a bullish pattern to a breakdown. A new Lower high (LH) and Lower Low (LL) along the current down trendline. Support at 92.10 is not expected to a hold a retest of this important support level. (See RSI note)

WTI  CRUDE OIL
Price structure: This commodity is news driven by supply -demand.
WTI has again failed at the $42.0 resistance level with a strong range to again test $35.81. Clearly WTI remains in a tight trading range over the past 22 weeks, this contraction in volatility will lead to a highly volatile breakout higher or lower, given the historic Primary down trend in place, that breakout is expected to be lower.

Indicator: Relative Strength
RSI turning lower is not a great signal for the bullish. Still confused? So is the market.

Black and White Technical Report: The Week Beginning 2/11/2020, FP Markets

Comments from last week: The word consolidation has been used consistently in this report and again sums up the price movement in Oil. No trend is evident. Support remains at $35.81 with resistance at $42.00. The only movement that can come out of this type of price action is a volatile breakout. Higher or Lower, the preference is higher as the capitulation move from Q2 2020 would have satisfied the sellers.

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