Technical Report for the Week of 01/31/22

Technical Summary

Equities – The January 2022 -12.37% SPX correction is either a correction (10%) or the start of a deep correction (10-20%) or cyclical bear (20%-plus). The ability of SPX to maintain support at 4,222.62 (1/24/22 low) decides the next trend. Intermediate-term support resides at 4,028-4,142 (61.8% retracement from 3/4/21 to 1/4/22 rally, head/shoulders top breakdown target, and the top of broadening top/megaphone trendline or -14 to -16.4%). Failure to maintain support warns of a deep correction/cyclical bear to the 38.2% retracement (3,815.20) from March 2020-Jan 2022 rally or -20.82%, and 3,723.34 (Mar 2021 reaction low or -22.73%). An oversold condition, coupled with a positive outside day (1/28/22), hints at an oversold rally to key initial resistance at 4,435-4,453.23 (38.2% retracement from 1/4/22 to 1/24/22 decline, 200-day ma, and 1/26/22 high). Above this to 4,495 (Dec 2021 low), 4,531-4,546 (12/20/21 low, 50% retracement, and 10/21/21 breakout), 4.591-4,636 (61.8% retracement, 50-day ma, and Jan 2022 downtrend).

Fixed Income – The 10-year minus 3-mo yield spread continues to consolidate after a recent triangle breakout above 1.60-1.62. Above 1.71-1.73 confirms steepening spread. Initial support is 1.51/1.45 (50-day/200-day ma). The long, medium and short-term yields have broken out, suggesting investors expect the Fed to increase rates aggressively. An overbought condition suggests consolidations. TNX breakout above 1.693-1.765% suggests 1.903-1.971%. Initial support is 1.69%, 1.495-1.595%, and 1.34-1.44%.

Commodities – CRB breakout above 220 (secular downtrend channel) and 243.67 (Oct 2021 high) suggests 267.87 (61.8% retracement from 2011-2020 decline). Initial support rises to 241, 234.5 (50-day ma) and 220-222.5 (200-day ma). WTI Crude Oil breakout above 77 (2009 downtrend) suggests 91-93.5 (61.8% retracement from 2008-2020 decline). Initial support rises to 81-82 (1/24/22 low), 76 (50-day ma), and 73 (200-day ma). Gold is nearing a test of the bottom of its triangle pattern at 1,777 and Sep/Dec 2021 low (1,721-1,753).

Currencies – US Dollar breakout above 96.57-96.94 (Nov 2021 high and 50% retracement) confirms the next rally to 97.81-98.31. Initial support rises to 96.0-96.5 (Jan 2022 breakout and the 50-day ma). EURUSD has broken its Nov 2021 reaction low (1.1186). The breakdown warns of selling to 1.09-1.10. Initial resistance is 1.1186 and 1.131. JPYUSD remains vulnerable to a decline to 0.8595 (Jan 2022 low) and 0.8427-0.8453. Initial resistance is 0.8812-0.8886 (Nov/Dec 2021 and Jan 2022 highs) and then 0.8956-0.896 (200-day ma).

S&P 500 Sectors – Despite the broad market sell-offs in the past week, seven (7) S&P sectors remain within the Leading and Improving Quadrants, suggesting a near-term oversold market. Utilities (XLU) joins Consumer Staples (XLP), Real Estate (XLRE), Energy (XLE), and Materials (XLB) in the Leading Quadrant. Financials (XLF) joins Industrial (XLI) and Healthcare (XLV) in the Improving Quadrant. Technology slips into the Weakening Quadrant with Consumer Discretionary (XLY) still weakening. Communication Services strengthens in the Lagging Quadrant.

To view the entire report go to the Reports tab on the website or click the following:

100 views0 comments