[Premium] High-Level Market Update

Let's start with the S&P Global 100, which is a US-based ETF that we use to get a feel for what Equities around the globe are doing. In March prices tested long-term support and have since pressed to new all-time highs.

Last week prices printed an "outside bar," which occurs when prices eclipse the prior week's high and low, signaling a pickup in volatility as buyers and sellers fight for control. In other words, this is a potential trend change signal that needs confirmation by prices following through below this week's low (56.50) in the coming week. While not inherently bearish, a potential change of character worth noting, especially given this week's low also corresponds with the February high in stocks.

Click on chart to enlarge view. 

And then looking to Indian stocks, we have the Nifty 50 printing a "bearish engulfing" candle, which occurs when prices open above the prior week's high and then close below the prior week's low...essentially "engulfing" that entire week of price action. Again, this is another potential reversal signal that requires downside follow-through below this week's low.

It's also worth noting that it occurred at a very logical resistance level near 11,800 and momentum never reached overbought territory, despite the strong rally since March.

And then here's the S&P 500, which is retesting its breakout above the early 2020 highs of 3,400. That's the line in the sand. If prices are above that level, then the bias is to the upside, but below it a failed breakout confirms and we need to be prepared for more volatility ahead.

As we can see, from a stock market perspective, last week's action in Equities was a heads up that something could be changing in the near-term. As we discussed in Monday's post, the pullback in Indian stocks occurred at a very logical level and the flat 200-day moving averages suggest some consolidation would be healthy after the strong run off the March lows.

With that said, we don't want to be flipping the book short since the global environment for Equities is still supportive of higher prices over the intermediate/long-term. Instead, we want to be taking a more defensive approach and protecting gains after months and months of new long ideas.

We discussed this "defensive approach" in more detail in Monday's post.

Additionally, we want to provide an update on Base and Precious Metals after last weekend's post where we discussed the potential of further upside in the space on the back of US Dollar weakness. While we did initially get some US Dollar weakness, it rallied late in the week and put a damper on the continuation patterns we were seeing in Metals.

First, let's start with Copper, which is also printing an "outside bar" as momentum diverges. Again, a potential reversal signal occurring at what's a very logical level (see daily chart below).

Here's the daily chart we discussed last week showing momentum diverging and resistance at 542. A breakout above that would redefine our risk on the long side and likely occur in an environment where we are seeing the US Dollar follow-through to the downside and Metals and Commodities in general pick up again.

And here's Gold sitting right at our risk management level of 50,500. As long as prices are above that level, then our bullish thesis is intact and we can stay in the trade.

Same goes for Silver, where our level is 61,000. If prices are above that, then the bullish thesis we outlined last week will remain intact.

To conclude: When it comes to the bullish short-term thesis Metals we outlined last week, not much has changed. Sure, the US Dollar has bounced back a bit and Metals have not gotten off to the strong start we expected...but they also haven't broken our risk management levels so we're going to leave the positions be and see how they play out.

If the US Dollar's rally does continue this week and Gold and Silver do break their short-term risk management levels, we take our losses and move on. And remember, if traditionally bullish consolidation patterns like these in Gold and Silver don't resolve in the direction of the underlying trend...that's information in and of itself. It's the market telling us that prices need more time to consolidate gains and that we should exercise patience in waiting for an attractive reward/risk scenario to emerge once again.

I didn't like seeing the US Dollar's strength last week, but we'll have to see what this week has in store for us and then react accordingly based on our original thesis/plan.

And for USD/INR, which is essentially playing off that same bearish US Dollar thesis, the breakdown and short thesis remains intact as long as prices are below their October 2018 highs near 74.50. We're still below that.

Okay, so we've updated our short-term views on Equities and Metals. Let's take a look at one last development from this week that I think was noteworthy.

Crude Oil has been on our radar for a while as it approached resistance near 3,100-3,200 and it's finally resolving its range to the downside. If you were looking for a reason to get short Oil, this is as good as it gets.

As long as prices are below 3,200 in Crude Oil, then the bias appears to be lower with a target back near long-term support at 1,900.

More importantly, this could also be another potential headwind for Equities as Crude Oil is typically viewed as a risk appetite barometer, so it's definitely something to keep an eye on in the near-term.

Patience and defense in this environment continue to make sense as we wait for the market to give us more information. We've had a great run off the March lows in stocks and are now seeing some signs of short-term deterioration in that trend.

We'll be watching in the days and weeks ahead to see how it develops globally and adjusting our outlook accordingly.

Thanks for reading and please let us know if you have any questions.

Allstarcharts Team