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Technical Report for the Week of 05/15/23

Technical Summary

Equities – SPX – Although a bullish cup and handle pattern developed, previous patterns have failed to follow through. Nonetheless, above 4,186.92-4,195.44 (Feb/May 2023 highs) suggests 386.58 points or an SPX target to 4,325.44 (8/16/22 reaction high) and 4,582 (target). The 5/4/23 island reversal also hints at higher prices. Above 4,186.92 (5/1/23 high) confirms a breakout and suggests 138.64 points or 4,324.5. Initial support is 4,048-4,057.5 (Apr/May 2023 lows and 50-day ma) and 3,975-3,999.5 (200-day ma and 3/29/23 gap-up).

Fixed Income – TNX minus 3-month Treasury yield – The spread fell to -1.89 (5/4/23), suggesting another oversold condition (RSI – 39.59). Initial resistance is -1.49 to -1.32 (Jan 2023 lows and the 50-day ma) and -0.83 to -0.65 (Mar 2023 high and 200-day ma). TYX and TNX – Since peaking in Oct 2022, a divergence between TYX and TNX via higher lows and lower lows warns of a change in the direction of interest rates. TNX – The Sept/Oct 2022 downtrend is 3.18% and 3.956%. Initial resistance is 3.55-3.64% (50-day/200-day ma and Apr 2023 highs).

Commodities – CRB – Rally to 278.93 (4/18/23) failed near key resistance at 275-280 (200-day ma), prompting a decline to 254-256.5 (Mar/May 2023 lows). Initial resistance is 266 (50-day ma). WTI Crude – Decline nears pivotal support at 62-64/60 (Aug/Dec 2021 and Mar/May 2023 lows/bottom of 2022 downtrend channel). Initial resistance is 75-76. Gold – Consolidates between 2,003/1,975-1,981 (Apr 2023 high/50-day ma, and Feb 2023 high) and 2,079-2,085 (Mar 2022 and May 2023 highs).

Currencies – USD – A 1-year h/s top with a neckline at 101.42/100.42-101.68 (May 2022 and Feb/Apr 2023 lows). A positive outside day on 4/14/23 suggests an oversold rally toward 102-103. EURUSD – Dec 2022 downtrend breakout and golden cross buy signal hint at a bottom. A negative outside day on 4/14/23 warns at consolidation to 1.0735-1.085. USDJPY – A head and shoulders top with the neckline at 126.36-127.49 (May 2022 and Jan 2023 lows). An oversold rally nears pivotal resistance at 137-138 (200-day ma and right shoulder).

S&P 500 Sectors – Five sectors remain in the Lagging Quadrant, including Materials (XLB), Real Estate (XLRE), Financial (XLF), Energy (XLE), and Industrials (XLI). XLB, XLI, XLRE, and XLF weaken, and XLE improves. Healthcare (XLV) joins Utilities (XLU), Consumer Staples (XLP), and Consumer Discretionary (XLY) in the Improving Quadrant, with XLU and XLP strengthening and XLY weakening. Technology (XLK) and Communication Services (XLC) remain in the Leading Quadrant, with XLK bottoming.

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