Technical Report for the Week of 05/10/21

Technical Summary

Equities – The SPX Index may still be peaking near-term as it challenges the top of its Nov 2020 uptrend channel (4,275-4,278). However, a breakout above 4,219 (5/7/21) now suggests the next SPX rally to 4,320, near-term. A breakout above 4,278 also suggests a target to 4,560-4,595 (Mar 2021 channel breakout target and Nov 2020 V-pattern breakout target, intermediate-term. Key initial support rises to 4,219 (5/7/21 breakout), and below this to 4,118-4,129 (4/20 and 5/4/21 lows), 4,033.5-4,044 (50-day ma and the extension of Apr 2021 breakout), and 3,996-4,014 (bottom of Nov 2020 channel).

Fixed Income – The 30-year Treasury yields (TYX) have achieved the late-2019 reaction highs (2.46%), while 10-year yields (TNX) rallied to 1.765%, just shy of the late-2019 reaction highs (1.934-1.943%). TYX and TNX have both achieved their Aug 2020 uptrend channel breakout targets at 2.44-2.55% and 1.66-1.68%. Near-term overbought conditions have promptly led to consolidations to 2.16% and 1.471%. Did the recent brief consolidations alleviate overbought conditions allowing for the resumptions of their respective Aug 2020 uptrends?

Commodities – CRB Index has broken out above its critical 2018/2008 downtrends (176-177/197) suggesting the next rally to 206.95 (May 2018 high). A breakout here renders targets to 216-220 (2011 downtrend). The key initial support rises to 195-196, 192, and then 183-185. WTI Crude continues to challenge key resistance 66.5-68 (2019, 2020, and 2021 highs), and above this to 74-77 (2008 downtrend). Initial support is 60.5-62 and 57-58. Gold is challenging pivotal resistance at 1,856-1,870 (200-day ma and top of the Aug 2020 downtrend channel).

Currencies – US Dollar (USD) bottoming process of three higher lows (1/26, 2/25, and 4/29/21 at 89.17, 89.68, and 90.39) may be in jeopardy, as a 4-mo head and shoulders top has developed. EURUSD continues with its 9-mo head/shoulders top pattern. The head is 1.2349. The left and right shoulders are 1.2012/1.215-1.2243. Below the neckline at 1.1605-1.1703 confirms the breakdown. JPYUSD is attempting to develop a technical base via a trading range between 0.9116-0.9144 (3/15 and 5/3/21 lows) and 0.9304 (4/23/21 reaction high).

S&P 500 Sectors – In the past eight weeks ending on May 3, 2021, sector rotations continue to confirm a split market environment. Real Estate (XLRE) joins Industrials (XLI), Material (XLB), and Financials (XLF) in the Leading Quadrant. Financials has weakened and may soon slip into the Weakening Quadrant. Communication Services (XLC) and Energy (XLE) have fallen into the Weakening Quadrant suggesting consolidations. Utilities and Consumer Staples (XL) continue to improve in the Improving Quadrant. Healthcare (XLV), Technology (XLK), and Consumer Discretionary (XLY) remain confined to the Lagging Quadrant, with XLV close to moving into the Improving Quadrant.

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