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Technical Report for the Week of 03/07/22

Technical Summary

Equities – A new 2-month downtrend channel has developed in the S&P 500 Index, suggesting the market psychology has changed from buying on dips to selling on rallies and hence the lower-highs and lower-lows. The recent oversold rally has faded at 4,416.78 (3/3/22) or near key initial resistance at the 38.2% retracement (4,409) from 1/4/22 to 2/24/22 decline). Because of the 2-month downtrend channel and SPX trading below its 50-day and 200-day moving averages, there are risks for further selling. Initial support is 4,279-4,306 (Sept/Oct 2021 lows, 1/28 and 3/1/22 lows), and below this to 4,222.5-4,114.5 (1/24 and 2/24/22 reaction lows). Violation here warns of the next SPX selloff.

Fixed Income – The 10-year minus 3-mo yield spread has contracted to support at 1.40-1.45 (200-day ma and Aug 2021 uptrend). A breakdown warns at a deeper contraction. U.S. rates have broken out earlier in the year, suggesting investors expect the Fed to raise rates starting in March. Overbought conditions warn at consolidations. TNX has failed to clear above the top of the Jul 2021 uptrend channel (2.065-2.13%), prompting a pullback to initial support at 1.67-1.68% and then 1.52-1.53%.

Commodities – CRB nears next resistance at 311.5-313 (2014 highs), and above this to 321.5-326 (2012 highs), 331.62 (61.8% retracement), and 366-371 (2006/2011 highs). Initial support rises to 268, 253.5-257, 237-241, and 229.5. WTI Crude Oil continues to trend higher to next resistance at 112-115 (2011/2013 highs), and above this to 147.27 (Jul 2008 all-time high). Initial support is 96-98.5, 85-87, 81.5, and 76.5. Gold has broken out above 1,859-1,879.5, suggesting a retest of 2,089.20 (2020 all-time high).

Currencies – US Dollar rallies to 98.31-98.50 (61.8% retracement from 2020-2021 decline and Nov 2020 high). Initial support is 97.44-97.81 (Jun 20/Jan 22 highs). EURUSD has broken a broaden-top and a downtrend channel, suggesting 1.0727-1.0787 and 1.06-1.0636. Initial resistance falls to 1.0975 (Mar 2020 channel breakdown) and 1.1122-1.1186. JPYUSD retains a 1-year downtrend. An oversold condition hints at a technical base between 0.8595-0.8596 (Jan/Feb 2022 lows) and 0.8896-0.890 (Nov 2021 high, 2021 downtrend, and 200-day ma).

S&P 500 Sectors – RRG study shows continued rotation into the defensive, commodity-based, and interest-rate-sensitive sectors at the expense of cyclical and technology sectors. Healthcare (XLV), Financials (XLF), Utilities (XLU), Consumer Staples (XLP), Energy (XLE), and Materials (XLB) remain in the Leading Quadrant. Communication Services (XLC) and Industrial (XLI) reside within the Improving Quadrant. XLI is closing in on the Leading Quadrant. Healthcare (XLV) declines to the Weakening Quadrant. Technology (XLK) joins Consumer Discretionary (XLY) in the Lagging Quadrant.

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