Technical Report for the Week of 03/01/21

Technical Summary

Equities – The recent -4.07% correction in SPX is nearing a crucial test of initial support at 3,805.5-3,822 or the bottom of the Nov 2020 uptrend channel, the 50-day ma, and the 2/23/21 low. A successful test of this support can lead to a rally to initial resistance at 3,861.5-3,871 (Jan 2021 highs), and above this to 3,929-3,950.5, coinciding with the Feb 2021 all-time highs. Despite the recent consolidation, SPX remains moderately overbought. Violation of 3,805.5 warns of the next SPX decline to 3,731-3,760 or the top of broadening top breakout and the Jan 2021 uptrend, and below this to 3,677-3,694, 3,663.5-3,636.5, 3,508-3,592, and then to 3,417-3,448 (200-day ma).

Fixed Income – On 2/25/21, the 10-year (TNX) and 30-year treasury yields (TYX) have rallied sharply to 1.518% and 2.308%, respectively, or close to their Sep, Nov, and Dec 2019 reaction highs at 1.903%, 1.943%, and 1.935% (TNX), and 2.378%, 2.427%, and 2.389% (TYX). Are TNX and TYX peaking? Also, TYX and TNX have broken out above the top of their respective Aug 2020 uptrend channels (i.e., 1.79%-2.17% and 1.08%-1.37%). The recent breakouts suggest rallies to 2.44-2.55% and 1.66-1.68%. Initial supports are 2.17%/1.915-1.93% (TYX) and 1.187-1.245%/1.001-1.105% (TNX).

Commodities – CRB Index has cleared the 2018 intermediate-term downtrend (178). The breakout suggests a retest of 202-207 (2008 highs). Initial support rises to 188-189.5, 184-185, and then 176.5-178. WTI Crude’s breakout above 57 (2018 downtrend) has triggered a retest of key resistance of 65.65-66.60 (Apr 2019 and Jan 2021 highs). Initial support rises to 56-57 and then 54-55. Gold’s 6-month correction is nearing a crucial test of pivotal support at 1,666-1,695 (bottom of Aug 2020 channel, Apr, May, and Jun 2020 lows, and the 61.8% retracement from the Mar-Aug 2020 rally).

Currencies – US Dollar (USD) may have bottomed via higher-low patterns (i.e., Feb 2018/Jan 2021 lows at 88.15/89.12 and Jan/Feb 2021 lows at 89.17/89.68). Above 90.5-92 further confirms a breakout. Support rises to 89.17-89.68 and below this to 88.15-89.17. EURUSD appears to have broken out of a 12-year downtrend above 1.20-1.21. A surge above 1.25-1.255 would further reaffirm the breakout. Key support moves up to 1.195-1.214 and then 1.15-1.17. JPYUSD continues to weaken. The next key support is 0.9341-0.9351, 0.9246-0.93, and 0.91-0.92. Initial resistance is 0.948-0.959 (200-day/50-day ma).

S&P 500 Sectors – In the past eight weeks ending on February 22, 2021, the S&P 500 RRG sector study show constructive sector rotations. Communication Services (XLC) joins Technology (XLK), Energy (XLE), and Financial (XLF) in the Leading Quadrant. XLE and XLF continue to lose price momentum but not relative strength. Industrial (XLI) has quietly slipped into the Lagging Quadrant joining Consumer Staples (XLP) and Utilities (XLU). Consumer Discretionary (XLY) and Materials (XLB) remain in the Weakening Quadrant. However, XLY is close to moving to the Leading Quadrant. Real Estate (XLRE) and Healthcare (XLV) continue to improve within the Improving Quadrant.

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Technical Summary Equities – SPX nears pivotal intermediate-term resistance at 4,105-4,219 or the top of the Jan/Mar 2022 downtrends, Jun, and Sept 2022 highs, the 50% retracement from the Jan-Oct 202