Technical Report for the Week of 02/22/21

Technical Summary

Equities – SPX is approaching the 1st anniversary of the -35.41% February to March 2020 bear decline. We recommend traders and investors pay close attention to the technical conditions of SPX in the days and weeks ahead for clues for any directional trend change. The primary trend remains the bullish Nov 2020 uptrend channel between 3,788-3,807 and 3,961-3,990. A surge above 3,990 confirms an accelerated channel breakout and suggests 202 points or the next SPX rally to 4,192. Initial trading support rises to 3,871-3,885, or the 2/5/21 gap-up breakout and 2/18/21 low. Violation here renders a decline to 3,784-3,807 or the 2/2/21 gap-up, 50-day ma, and the bottom of the Nov 2020 uptrend channel.

Fixed Income – The 30-year US yields (TYX) and the 10-year US yields (TNX) continue with their higher-lows and higher-highs, signaling rising US interest rates. The recent TYX and TNX breakouts above their respective Mar 2020 highs at 1.897% and 1.266% further reaffirm higher rates. TYX and TYX retain their Aug 2020 uptrend channels between 1.78% and 2.12%, and 1.069% and 1.347%. Breakouts above 2.12% and 1.347% suggest rallies to 2.44-2.46% and 1.625-1.668%, respectively. Initial supports are 1.915%/1.76-1.78% (TYX) and 1.187-1.245%/1.001-1.069% (TNX).

Commodities – CRB Index has cleared above its 2018 downtrend (178), suggesting the next rally toward 188-190, 191-191.5, and then 202-207, overtime. Initial support rises to 187-188, 181-182, and then to 175-176. WTI Crude breakout above 57 (2018 downtrend) suggests the next rally toward 63.65-66.60. Initial support rises to 57 or the extension of the 2018 downtrend, 54-55, and then 52-53. Gold’s recent consolidation is nearing another key test of support at 1,767-1,770. The initial resistance is 1,854-1,879, coinciding with the 50-day ma, 200-day ma, and the late-Jan 2021 highs and then to 1,666-1,672.

Currencies – US Dollar (USD) may be bottoming as evidenced by a higher-low pattern (Feb 2018 low is 88.15 and Jan 2021 low is 89.12) as well as a potential 1-year falling wedge. Above 90.5-92 confirms a USD recovery. Support is 90-90.25. EURUSD may have negated its 12-year downtrend above 1.20-1.21. A surge above 1.25-1.255 would reaffirm breakout. Key support is 1.194-1.2154 (Feb 2021 low, 11/20 breakout, and 10/30-wk ma). JPYUSD has violated the 10-wk/30-wk ma and the 2020 rising wedge. Next support is 0.9415-0.947 or the Oct/Nov 2020/Feb 2021 lows and the 200-day ma.

S&P 500 Sectors – In the past eight weeks ending on February 16, 2021, the S&P 500 RRG sector study suggests the following. Technology (XLK), Energy (XLE), and Financial (XLF) remain in the Leading Quadrant. XLE and XLF continue to lose price momentum suggesting near-term overbought conditions. Communication Services (XLC), Industrial (XLI), Consumer Discretionary (XLY), and Materials (XLB) remain in the Weakening Quadrant. However, XLC and XLY may soon move into the Leading Quadrant. Consumer Staples (XLP) and Utilities (XLU) remain in the Lagging Quadrant. Real Estate (XLRE) joins Healthcare (XLV) in the Improving Quadrant.

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