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Technical Report for the Week of 04/11/22

Updated: Apr 12, 2022

Technical Summary

Equities – Two broadening tops or megaphones during 2018-2020 and in the past 8-months warn of SPX trading ranges. The breakout of the 2-year pattern via the top of the broadening top/megaphone trendline at 4,053-4,212 is now critical support. The bottom of the 8-month pattern at 4,042 also offers crucial support on pullbacks. Violation confirms a top and warns of a deeper correction or a cyclical bear. On a near-term basis, the ability of SPX to maintain initial support at 4,4,27-4,450 (4/6/22 low and the 50-day ma) hints at another SPX rally to 4,595-4,637 (Feb/Mar 2022 highs) and above this to 4,818.62 (1/4/22 high). A record-high suggests a test of the top of the Aug 2021 trendline at 5,145.

Fixed Income – The 10-year minus 3-mo yield spread continues to expand. Above 1.71-1.73 hints at 2.09 (Dec 2016), 2.48 (Jun 2015), and 2.97 (Dec 2013). Will the spread peak at 2.97, prompting the next spread contraction? The 10-year minus 2-year spread inverted (-0.06) in Apr 2022. Does this imply the next US recession will develop in Dec 2022-Feb 2023? TNX is approaching an inflection point near the top of its 38-year structural downtrend channel (2.87-3.19%) and the 2013/2018 highs (3.036-3.248%). Will a peak signal the next TNX decline?

Commodities – CRB is nearing the next key resistance at 313-326 (2012/2014 highs and the top of the 2020 uptrend channel). An overbought condition warns of consolidation to initial support at 281-282/250-255. WTI Crude Oil can retest 116.64/130.50 (Mar 2022 lower highs) and 147.27 (Jul 2008 all-time high). However, an overbought condition warns of consolidation to 93.41-93.81, 81-85, and 76-77. Gold continues to consolidate between 1,879.5-1,893 (50-day ma and 2/17/22 breakout) and 1,967-1,967.5 (2/24 and 3/24/22 highs).

Currencies – US Dollar continues to strengthen toward the next resistance at 100.41-100.61 and 100.97-101.14. Initial support is 99.40-99.425 and 97.58-97.73. EURUSD continues with a 2-year downtrend channel. Initial support at 1.0807 (Mar 2022 low). Resistance is 1.1122-1.1186 (Mar 2022 highs and the 50-day ma). JPYUSD is deeply oversold and is attempting to rebound from critical support at 0.7946-0.805 (2007, 2015, and 2022 lows). Initial resistance is 0.8245-0.83, and above this to 0.84, and 0.849-0.8596.

S&P 500 Sectors – The RRG study shows similar rotations to the past week. Sector rotations continue to favor the defensive and commodities sectors. Real Estate (XLRE) joins Industrial (XLI), Healthcare (XLV), Utilities (XLU), Consumer Staples (XLP), Energy (XLE), and Materials (XLB) in the Leading Quadrant. XLU, XLV, and XLB are the relative leaders. Communication Services (XLC), Technology (XLK), and Consumer Discretionary (XLY) sectors remain in the Lagging Quadrant. Financials (XLF) slips into the Weakening Quadrant.

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