Technical Report for the Week of 01/30/23
Equities – The Jan-Oct 2022 SPX decline of 1,327.04 points or 27.54% has been painful. However, the ability of SPX to maintain above the 50% retracement (3,505) and most importantly the critical 61.8% retracement (3,195) from the 3/23/20 to 1/4/22 rally suggests this is a cyclical bear and not a structural bear. SPX is not out of the woods since previous breakdown levels can turn into pivotal resistances on rallies starting at 4,101-4,119 and above this at 4,155-4,222.5 and 4,311.5-4,325. Initial support rises to 3,943-3,958 (50-day and 200-day ma).
Fixed Income – The 10-year minus 3-mo yield spread (-1.21) has broken below the Jan 2001 all-time low (-0.95), confirming a new record low (-1.32). The 10-year minus 2-year (-0.67) shows a potential positive divergence with a higher-low pattern, corresponding to the Dec 2022 and Jan 2023 lows (-0.84 and -0.74). TNX – Correction from 4.333% (10/21/22 high) tests pivotal support at 3.248-3.334% (200-day ma). A breakdown signals a decline to 3.03% (2020 uptrend), and 2.40-2.525% (2021 uptrend). Initial resistance is 3.618-3.72%/3.91-3.99%.
Commodities – CRB rebounds from key support at 261-264 (61.8% retracement from Dec 2021-Jun 2022 rally and the Sept 2022 low). Testing initial resistance at 275-280 (Dec 2022 highs/50-day ma). WTI Crude rebounds from intermediate-term support at 70-74.5 (2008 channel breakout and the 30-mo ma). Initial resistance is 79.5-83 (50-day ma) and 92-94 (200-day ma). Gold continues with its rally from 1,618-1,622 (Sept, Oct, Nov 2022 lows) to the next resistance at 1,963-1,966, and 2003. Initial support is 1,816.5-1,824.5 and 1,778-1,790.
Currencies – USD – Sept 2022 downturn near next support at 101.26-101.42 (May 2022 and Jan 2023 lows). Initial resistance is 103.5-104 (50-day ma) and 105.5-106 (200-day ma). EURUSD – Sept 2022 rally nears key resistance at 1.09-1.093 (50% retracement from the 2021-2022 decline). Initial support is 1.061-1.0735 (50-day ma) and 1.048-1.05. USDJPY – A head and shoulders top warns of a top. Below the second neckline at 126.36-127.49 (May and Jan 2023 lows) confirms a top. Initial resistance is 130.43-131.5.
S&P 500 Sectors – RRG study shows an acceleration in rotations. Three sectors remain in the Leading Quadrant, with all three sectors weakening (i.e., Consumer Staples (XLP), Materials (XLB), and Industrial (XLI). Healthcare (XLV) and Financial (XLF) slip into the Weakening Quadrant joining Energy (XLE). Technology (XLK), Communication Services (XLC), Utilities (XLU), and Real Estate (XLRE) strengthen in the Improving Quadrant. Consumer Discretionary (XLY) improves within the Lagging Quadrant.
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