Technical Report for the Week of 02/27/23
Equities – SPX – Is a head and shoulders bottom developing? Or is the mid-Oct 2022 oversold rally peaking and the 1-year cyclical bear resuming? On a positive note, SPX has rebounded from key support at 3,491.58 (10/13/22), coinciding with the 50% retracement from the Mar 2020-Jan 2022 rally and Aug 2020 V-pattern breakout). Critical resistance is 4,155.5-4,279 and 4,308-4,325 (May/Aug 2022 highs). The recent consolidation nears crucial support at 3,940-3,980.5 (extension of Jan 2022 downtrend and 50/200-day ma).
Fixed Income – The spread between the 10-year yield minus the 3-month yield fell to -1.32% (1/18/23), suggesting a higher low (-1.27) and an oversold rally. The 10-year minus 2-year yield spread (-0.83) has declined to a low of -0.83 (2/8/23). Is a higher-low developing (-0.84 on 12/7/22 and -0.83 on 2/8/23)? TNX – Correction from 4.333% rebounded from pivotal support at 3.248-3.411% (200-day ma), prompting recovery to key resistance at 3.905-3.99% (Sept and Dec 2022 highs) and 4.22-4.33% (Oct and Nov 2022 highs).
Commodities – CRB rebounds from key support at 261-264 (61.8% retracement from Dec 2021-Jun 2022 rally and the Sept 2022 low). Key resistance remains 276-280 and 285-287.5 (200-day ma). WTI Crude rebounds from intermediate-term support at 70-76 (2008 channel breakout and the 30-mo ma) to key initial resistance at 81.5-83/85 (Jan/Feb 2023 highs/Jul 2022 downtrend). Gold’s Nov 2022 rally faded at 1,975.20 (2/2/23), prompting consolidation to key support at 1,778-1,824.5 (30-mo ma and 200-day ma).
Currencies – USD – USD – The recovery from 99.15 (2/2/23 low) nears key resistance at 105.5-106 (200-day ma). Initial support is 102-103 (50-day ma) and 100.68-101.42 (May and Feb 2023 lows). EURUSD – Sept 2022 rally to 1.1033 (2/2/23) prompts consolidation to key support at 1.033-1.0483 (200-day ma). Initial resistance is 1.073-1.0735 (50-day ma). 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. Key resistance is 137-138 (200-day ma).
S&P 500 Sectors – RRG study shows further deterioration from the prior week. Six sectors reside in the Weakening sectors, including Materials (XLB), Consumer Staples (XLP), Industrial (XLI), Healthcare (XLV), Financial (XLF), and Energy (XLE). Utilities (XLU) slipped toward the Lagging Quadrant. Consumer Discretionary (XLY) and Real Estate (XLRE) remain in the Improving Quadrant, with XLRE weakening and XLY strengthening. Communication Services (XLC) is the only sector residing in the Leading Quadrant.
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