Technical Report for the Week of 01/09/23
Equities – SPX mid-Oct 2022 oversold rally stalled at 4,100.96 (12/13/22 high), encountering pivotal resistance at the Jan/Mar 2022 downtrends (4,022-4,065), the Jun and Sept 2022 highs (4,177.5/4,119), the 50% retracement (4,155) from Jan-Oct 2022 decline, and the 8/23/22 gap-down (4,195-4,219). The Dec 2022 correction nears initial support at 3,764.5 (12/22/22 low). A breakdown, coupled with a violation of Jul/Nov 2022 lows (3,721.5/3,688) and the 61.8% retracement (3,724) from the Oct-Dec 2022 oversold rally, warns of the next decline.
Fixed Income – The 10-year minus 3-mo yield spread (-1.12) has recently broken below the Jan 2001 all-time low of -0.95, confirming another record low. The 10-year minus 2-year (-0.69) has rebounded from Dec 2022 low (-0.84). Based on the average of 6 previous inversions, a recession can occur as early as Dec 2022-Feb 2023. TNX – Correction from 4.333% (10/21/22 high) found key support at 3.40-3.48%. However, the recent failure to clear key initial resistance at 3.77-3.99% warns of a retest of 3.40-3.48% and 3.263%.
Commodities – CRB tests support at 261-264 (61.8% retracement from Dec 2021-Jun 2022 rally and the Sept 2022 low). A breakdown suggests a decline to 241-245. Initial resistance is 276-278.5 (50-day) and 285.5-290. WTI Crude tests key support at 70-74 (2008 channel breakout/30-mo ma). Initial resistance is 80.5-83 (50-da ma) and 93.5-94(200-da ma). Gold rebounds from 1,618-1,622 (Sept, Oct, and Nov 2022 lows) to 1,880-1,883, 1,919, and 1,963-1,966. Support rises to 1,815-1,825 and 1,778-1,788.
Currencies – USD – Sept-Dec 2022 correction nears key support at 102-103 (May 2021 uptrend and the 50% retracement). Initial resistance is 106-106.5 (50-day and 200-day ma). EURUSD – The recovery challenges pivotal resistance at 1.06-1.0787 (May 2021 downtrend and 38.2% retracement). Initial support is 1.032-1.08 (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 136-136.5 (10-mo and 200-day ma).
S&P 500 Sectors – RRG study shows improvements from the prior week. Five sectors reside in the Leading Quadrant - three strengthening (i.e., Consumer Staples (XLP), Industrials (XLI), and Materials (XLB)) and two weakening (i.e., Financial (XLF) and Healthcare (XLV)). Energy (XLE) slipped into the Weakening Quadrant, suggesting a correction. Communication Services (XLC) joins Utilities (XLU) and Real Estate (XLRE) in the Improving Quadrant. Technology (XLK) joins Consumer Discretionary (XLY) in the Lagging Quadrant.
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