Technical Report for the Week of 05/16/22
Technical Summary
Equities – The ability to rebound from the bottom of its Jan 2022 downtrend channel at 3,853.5-3,859 hints at another SPX oversold rally to 4,062.5-4,114.5 (2/24 and 5/2/22 lows), and above this 4,156.5-4,158 (38.2% retracement from 3/29-5/12/22 decline and 3/8/22 low), 4,248 (50% retracement), and 4,308-4,340 (50-day ma and the 61.8% retracement). Key support is 3,815-3,859 (38.2% retracement from Mar 2020-Jan 2022 rally and 5/12/22 low), 3,505-3,650 (50% retracement), and 3,195-3,393.5 (61.8% retracement/ V-pattern breakout).
Fixed Income – The 10-year minus 3-mo yield spread diverges from the popular 10-year minus 2-year yield spread. A breakout above 1.71-1.73 suggests 2.48 and 2.97. Initial support is 1.88-1.90 (50-day ma & late-Apr/May 2022 lows). The 10-year minus 2-year spread briefly inverted (-0.06) in early-Apr 2022. Does this imply the next US recession in Dec 2022-Feb 2023? TNX nears an inflection as it challenges structural resistance at 3.0-3.25% (top of the 1980 downtrend channel and the 2013/2018 highs).
Commodities – CRB tests key resistance at 313/321.5-326 (2012/2014 highs) and 332-338 (61.8% retracement from 2008-2021 decline). Initial support is 293-297, 280.5-285, 265.5, and 255-258. WTI Crude nears key resistance at 107-114/130.50 (2011/2013/Mar intra-month 2022 highs) and 147/140 (2008 record high). Initial support is 105, 95-98, 93-93.5, and 85-87.5. For Gold, the violation of key initial support at 1,833.5-1,879.5 warns at decline to 1,794-1,811. Initial resistance is 1,837-1,879.5, 1,919-1,928, 1,963-1,966, 2,003, 2,078-2,089.
Currencies – US Dollar tests pivotal resistance at 105.65 (38.2% retracement from Feb 1985-Mar 2008 decline). Initial support rises to 103.95, 101.34-102.38, 100.25-100.5, 99.43-99.56, and 97.44-97.74. EURUSD continues to test neckline support at 1.0339-1.0456. Violation warns of a major top. Initial resistance is 1.0636-1.0642, 1.0758-1.082, 1.0934-1.0936, 1.1121-1.12, and 1.132-1.15. JPYUSD has confirmed a top below the neckline at 0.7946-0.8054. Next support is 0.740 (2002 low) and 0.6784 (1998 low).
S&P 500 Sectors – RRG study shows rotations continue to favor defensive and commodities sectors such as Real Estate (XLRE), Industrial (XLI), Healthcare (XLV), Utilities (XLU), Consumer Staples (XLP), Energy (XLE), and Materials (XLB) remain in the Leading Quadrant. XLB and XLP show strong relative price momentum. Communication Services (XLC) remains in the Improving Quadrant. Financials (XLF), Technology (XLK), and Consumer Discretionary (XLY) remain in the Lagging Quadrant, with the sectors bottoming.
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