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Technical Report for the Week of 03/21/22

Updated: Mar 23, 2022

Technical Summary

Equities – The 4-day SPX oversold rally from 4,115.65-4,157.87 (2/24/22 and 3/8/22 higher lows) hints at a bottom. However, a death cross sell signal and head/shoulders top pattern warn of further volatility. The SPX rally nears key resistance at 4,467.5-4,470.5 (50% retracement from 1/4-2/24/22 decline and 200-day ma) and above to 4,456-4,550 (61.8% retracement, Sep 2021 high, and left shoulder), and 4,595 (2/2/22 high and right shoulder). A breakout above 4,595 negates head/shoulders top and signals a retest of 1/4/22 all-time high at 4,818.62. Initial support rises to 4,223-4,279 (Oct 2021 and 1/24/22 lows) and below this 4,114.5-4,157.87 (2/24 and 3/8/22 lows). Violation here warns of SPX decline to 4,057 (5/12/21 low) and 3,920 (bottom of downtrend channel).

Fixed Income – The 10-year minus 3-mo yield spread continues to expand. Above 1.71-1.73 hints at 2.09 (Dec 2016 high). Support is 1.71-1.73, 1.61-1.62, 1.52-1.55, and 1.40-1.45. The long-end, medium, and short-end yields have broken out earlier in the year, signaling higher rates. Recent consolidations have led to breakouts and resumptions of rallies. TNX has achieved a target of 2.065-2.188%. Above 2.246% hints at 2.44-2.78%. Initial support rises to 2.020-2.065% (3/11 gap-up), 1.892%, 1.68-1.76%, and 1.53-1.55%.

Commodities – CRB nears the 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 285, 265.5, and 246. WTI Crude Oil can retest 147.27 (Jul 2008 all-time high). An overbought condition triggered a consolidation to initial support at 93-93.5 (50-day ma), and below this to 85-87.5 (Feb 2022 lows) and 78.5-80. Gold traded to an overbought level and consolidated between 1,873.5-1,895 and 2,079-2,089.

Currencies – US Dollar is consolidating within a trading range between 97.44-97.72 (1/28/22 high, 3/10, and 3/17/22 lows) and 99.3-99.425 (3/22 lows). EURUSD has rebounded from an oversold condition, and a trading range has developed between 1.0807-1.0901 (Mar 2022 lows) and 1.1121-1.1138 (3/10 and 3/17/22 highs). JPYUSD has broken down and the next decline to 0.820-0.824 (2005/2014) and 0.795-0.805 (2007/2015 lows). Initial resistance is 0.8595-0.8596, 0.867-0.8787, and 0.8812.

S&P 500 Sectors – RRG study shows few changes from the previous week. The rotations continue to favor the defensive, commodity, and interest-rate-sensitive sectors. Industrial (XLI), Healthcare (XLV), Financials (XLF), Utilities (XLU), Consumer Staples (XLP), Energy (XLE), and Materials (XLB) remain in the Leading Quadrant. Communication Services (XLC) weakens in the Improving Quadrant. Real Estate (XLRE) remains in the Weakening Quadrant. Technology (XLK) and Consumer Discretionary (XLY) show signs of bottoming within the Lagging Quadrant.

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