Technical Report for the Week of 02/08/21

Updated: Feb 9

Technical Summary

Equities – The failure of SPX to clear above the top of its November 2020 uptrend channel at 3,763-3,774 and 3,914-3,936 led to the 4.57% correction during 1/21-1/29/21. The ability to find key support at 3,694.12 (1/29/21) alleviated an overbought condition and the resumption of the Nov 2020 uptrend. The 2/5/21 gap-up breakout above 3,870.90 signals the next SPX rally to 3,914-3,936 (top of the Nov 2020 uptrend channel), and 4,048 (breakout target). Initial support rises to 3,871-2,875 (2/5/21 gap-up breakout), 3,784-3,792 (2/2/21 gap-up), and 3,763-3,774 (bottom of Nov 2020 uptrend channel), 3,742 (50-day ma), and then to 3,694.12 (1/29/21 low).

Fixed Income – The 30-year US yields (TYX) and the 10-year US yields (TNX) continue with higher-lows and higher-highs, reaffirming rising US interest rates. TYX has surpassed its Mar 2020 high (1.897%) and TNX is nearing its Mar 2020 high (1.246%). TYX and TYX also continue with their Aug 2020 uptrend channels between 1.74% and 2.10%, and 1.011% and 1.292%, respectively. Breakouts above 2.10% and 1.292%, respectively confirm the next rally to 2.45-2.46% (TYX) and to 1.3-1.57% (TNX). Initial supports are 1.92%/1.75-1.77% (TYX) and 0.975-1.01% (TNX).

Commodities – CRB Index has cleared above its 2018 downtrend (176-177), suggesting the next rally toward 200-207. Initial support rises to 166.5-168.5 (50-day ma) and then to 154.5-155. WTI Crude Oil is approaching key resistance at 57 (2018 downtrend). Initial support rises to 49.5-50.5 (50-day/10-wk ma), and below this to 43-44 (30-wk ma). Gold continues with its consolidation and is now nearing another test of its key support at 1,760-1,785. The initial resistance is 1,875-1,879 (late-Jan 2021 highs) and then 1,962.5-1,966.

Currencies – US Dollar (USD) has failed at key resistance (90.5-91.75). A negative outside day (2/5/21) warns of consolidation to 90.5-91(50-day ma), and below this to 88.15-89.12. EURUSD is nearing a key test of support along the bottom of its 2002 uptrend channel at 1.20. A positive outside day (2/5/21) also hints at a potential near-term bottom. Key initial resistance is 1.2075-1.2139 (50-day ma). JPYUSD suffered a negative outside day/week (1/6/21 and 1/4/21) and violated the 50-day ma and the 2020 uptrend. It is now testing its 200-day ma (0.947).

S&P 500 Sectors – In the past eight weeks ending on February 5, 2021, the S&P 500 RRG sector study shows a few changes. Technology (XLK) returns to the Leading Quadrant joining Energy (XLE) and Financial (XLF). However, XLE and XLF continue to lose price momentum. Communication Services (XLC), Industrial (XLI), Consumer Discretionary (XLY), and Materials (XLB) remain in the Weakening Quadrant. However, XLC and XLY may soon return to the Leading Quadrant. Consumer Staples (XLP), Real Estate (XLRE), and Utilities (XLU) remain in the Lagging Quadrant. XLRE is close to moving into the Improving Quadrant. Healthcare (XLV) is still the only S&P sector in the Improving Quadrant.

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