Technical Report for the Week of 01/03/23
Equities – SPX closed at 3,839.50 or near the bottom of its yearly range, suggesting a negative outside year and warning of the next structural bear/trading range trend. However, the ability of SPX to maintain its 10-year ma (2,896) and the middle of the uptrend channel (2,519) hints at a structural trading range (2,900-3,100 and 4,800-5,000). The monthly chart suggests SPX remains in a secular or structural bull trend as long as it maintains the following criteria: RSI stays above 30-35, PPO above 0, above 30-mo and 40-mo ma, and the monthly moving averages trend up.
Fixed Income – The 10-year minus 3-mo yield spread contracted to long-term support at -0.95 (Jan 2001 all-time low). A successful test of support triggers a bounce toward -0.49 to -0.33, -0.20, and 0.04-0.13. The 10-year minus 2-year has also contracted. Based on the average of 6 previous inversions, a recession is likely as early as Dec 2022 to Feb 2023. TNX – Correction from 4.333% (10/21/22 high) rebounds from key support at 3.40-3.64%. TNX nears key initial resistance at 3.81-3.92% (Nov breakdown, Dec highs, 50-day ma).
Commodities – CRB recovery from 261-264 (61.8% retracement from Dec 2021-Jun 2022 rally and the Sept 2022 low) encounters initial resistance at 276-280 (50-day ma) and 285.5-290 (Oct/Nov highs and 10-mo/200-day ma). WTI Crude tests key support at 72-74 (2008 channel breakout and the 30-mo ma). Initial resistance is 81.5-83 (50-da ma) and 93.5-95(200-da ma). Gold rebounds from 1,618-1,622 (Sept, Oct, and Nov 2022 lows) to 1,823-1,837 (Sept 2021/Aug/Dec 2022 highs) and 1880-1,883. Support is 1,778-1,792 and 1,719-1,753.
Currencies – USD – Correction nears another critical support at 102-103 (May 2021 uptrend and the 50% retracement). Key resistance is 106-107.5 (10-wk and 30-wk ma). EURUSD – The recovery challenges pivotal resistance at 1.06-1.0787 (May 2021 downtrend and 38.2% retracement). Initial support is 1.03-1.05 (10-mo/ 50/200-day ma). USDJPY – A negative outside day (10/21/22) triggered consolidation to another key support at 130-131 (Jun 2022 breakout and Aug 2022 lows). Initial resistance is 135-136 (10-mo and 200-day ma).
S&P 500 Sectors – RRG study shows several rotations from the prior week. Six sectors remain in the Leading Quadrants. Three sectors strengthened (i.e., Consumer Staples (XLP), Industrials (XLI), and Materials (XLB)) and three sectors weakened (i.e., Energy (XLE), Financial (XLF), and Healthcare (XLV)). Utilities (XLU), Real Estate (XLRE), and Technology (XLK) move into the Improving Quadrant. Consumer Discretionary (XLY) and Communication Services (XLC) remain in the Lagging Quadrant with XLC improving and XLY weakening.
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