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Technical Report for the Week of 01/24/22

Equities – The Jan 2022 SPX correction of 423.28 points or -8.78% has led to the violation of the 50-day ma (4,665.53), Mar 2021 uptrend (4,592), 12/3/21 low or the neckline (4,495.12), and the 200-day ma (4,429.14). Failure to maintain the 200-day ma and neckline warns of a correction to the 10/4/21 reaction low (4,278.94), the bottom of the 2020 uptrend channel (4,240 or -11.20% to -12.0%), 4,142-4,172 (61.8% retracement from 3/4/21 to 1/4/22 rally and the head/shoulders top breakdown target or -13.42 to 14.04%). Failure to maintain support here opens the door for a deep and extensive correction toward the 38.2% retracement (3,815.20) from March 2020-Jan 2022 rally and the top of broadening top/megaphone trendline (3,984) or -17.32% to -20.82%, and 3,723.34 (Mar 2021 reaction low or -22.73%). The 50% retracement (3,505.24 or -27.26%) and 61.8% retracement (3,195.28 or 33.69%) offer longer-term supports. Key initial resistance is 4,495-4,546 (Dec 2021 lows/Sep 2021 high), and above this to 4,665.5 (50-day ma), 4,744-4,749 (Nov and 1/12/22 highs or left/right shoulders), and 4,818.62 (1/4/22 high).

Fixed Income – The 10-year minus 3-mo yield spread consolidates after a recent triangle breakout above 1.60-1.62. Above 1.71-1.73 confirms steepening spreads. Initial support is 1.50/1.45 (50-day/200-day ma). The long, medium and short-term yields have broken out, suggesting investors expect the Fed to be more aggressive. Overbought conditions suggest consolidations. TNX has broken resistance at 1.693-1.765%, signaling the next rally to 1.903-1.971%. Initial support rises to 1.69% and then 1.491-1.575%.

Commodities – CRB breakout above 220 (secular downtrend channel) and 244.18 (Oct 2021 high) suggests 267.87 (61.8% retracement from 2011-2020 decline). Initial support is 241, 233 (50-day ma) and 218-220 (200-day ma). WTI Crude Oil breakout above 74-77 (2009 structural downtrend) suggests 91-93.5 (61.8% retracement from 2008-2020 decline). Initial support is 75-76 (50-day ma) and 72-73 (200-day ma). Gold retains trading range between key support at 1,721-1,753 /1,766 (Sep/Dec 2021 lows) and resistance at 1,837-1,879.5.

Currencies – US Dollar breakout above 94.52-94.82 (Nov 2021), confirms a 2-yr cup and-handle/saucer bottom. The recent near-term consolidation to 92.61 successfully tested key support. EURUSD remains vulnerable as evidenced by flag/pennant. Below 1.1186 confirms the breakdown. Above 1.1483-1.1493 confirms breakout. JPYUSD has generated a deeply oversold rally toward key initial resistance at 0.8884-0.8886 (Nov/Dec 2021 highs) and then 0.8956-0.912. Key initial support is 0.8595-0.8657.

S&P 500 Sectors – Although seven (7) S&P sectors reside within the Leading and Improving Quadrants, the RRG sector study shows sharp rotations. Defensive sectors such as Consumer Staples (XLP), Utilities (XLU), Real Estate (XLRE), and commodity-related sectors such as Energy (XLE) and Materials occupy the Leading Quadrant. Healthcare (XLV) and Industrials (XLI) continue to improve within the Improving Quadrant. Technology (XLK) and Consumer Discretionary (XLY) slip into the Weakening Quadrant. Communication Services (XLC) and Financials (XLF) strengthen within the Lagging Quadrant.

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