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Technical Report for the Week of 01/10/22

Equities – The 10/25/21 breakout above 4,545.85 suggests 266.91 points or 4,813, which SPX achieved on 1/4/22 at 4,818.62. The 12/27/21 breakout above 4,743.83 still renders a rally to 4,902 (top of Mar 2021 uptrend channel) and 4,992.5. Above 4,902 confirms an accelerated channel breakout and suggests 5,248. The increase in volatility to start the year signals another inflection point. Key initial support is 4,674.5 (50-day ma). Violation here warns of the next decline to 4,531-4,556 (bottom of Mar 2021 uptrend, Oct 2021 breakout and 12/20/21 low), 4,495 (12/3/21 low), 4,403 (200-day ma) and 4,279-4,306 (Sep/Oct 2021 lows).

Fixed Income – The 10-year minus 3-mo US yield is nearing a key breakout above 1.62-1.73 (Oct/Nov 2021 high). Breakout confirms the resumption of the steepening yield curve spread. The long-end, medium, and short-end of the US treasury yields have broken out, suggesting investors expect the Fed to increase rates sooner than anticipated (hawkish). TNX has cleared above key resistance at 1.693-1.765% (Mar/Oct/Nov 2021 highs), suggesting the next rally to 1.903-1.971% (Sep, Oct, and Dec 2019 highs).

Commodities – CRB has recovered from its recent consolidation to key support at 217-221 (12/1/21 low, 10-mo, 30-wk, and 200-day ma). Key resistance is 241.18-243.67/245 (Oct 2021 high, 38.% retracement, and 2004 breakout). WTI Crude Oil remains in a near-term consolidation. Initial support is 75.5 (50-day ma), 71 (200-day ma), and 61.56-62.43 (May/Aug/Dec 2021 lows). Resistance is 84.97-85.41. Gold retains neutral trading range between support at 1,721-1,753 (Sep/Dec 2021 lows) and resistance at 1,837-1,879.5.

Currencies – US Dollar breakout above 94.52-94.82, confirms a 2-yr cup and-handle/saucer bottom. However, a near-term consolidation remains between 95.53-95.58 and 96.90-96.94. EURUSD continues with its bearish flag/pennant pattern. Below 1.1186, confirms a breakdown. Above 1.1386/1.14-1.15 confirms a breakout. JPYUSD has broken down and can retest 0.8427-0.8453 (Dec 2016 lows). A deeply oversold condition can lead to a technical rally toward initial resistance at 0.876 and 0.8872-0.8886.

S&P 500 Sectors – The RRG sector study shows eight of eleven S&P sectors residing in the Leading and Improving Quadrants. Materials (XLB) joins Real Estate (XLRE), Technology (XLK), and Consumer Discretionary (XLY) in the Leading Quadrant, with XLY weakening. Healthcare (XLV) joins Industrials (XLI), Utilities (XLU), and Consumer Staples (XLP) in the Improving Quadrant. Energy (XLE) has slipped into the Weakening Quadrant. Communication (XLC) and Financials (XLF) are strengthening within the Lagging Quadrant.

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