Technical Report for the Week of 05/17/21
Equities – The SPX Index (SPX) remains volatile near-term as it has struggled to surpass the top of its Nov 2020 uptrend channel (4,266-4,312). Initial resistance is 4,188.13 (5/11/21 gap-down), 4,219-4,238 (4/29 and 5/10/21 highs), and 4,238.04 (5/7/21 all-time high). A breakout would signal the next SPX rally to 4,266-4,312 (top of channel, near-term), 4,419 (4,238.04 breakout target, medium-term), and then 4,595 (Nov 2020 V-pattern breakout target, intermediate-term). Key initial support is 4,047-4,064 (50-day ma, the extension of Apr 2021 breakout, and the bottom of Nov 2020 channel). Major support remains at 3,702 (200-day ma).
Fixed Income – 30-year US Treasury yields (TYX) and 10-year US Treasury yields (TNX) are trading at overbought levels, suggesting near-term trading ranges. The trading range for TYX is between 2.210% and 2.476%. For TNX, it is between 1.53% and 1.746%. TYX and TNX have 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 toward 2.16% and 1.471%. The ability to rebound can alleviate the overbought conditions allowing for the resumption of primary 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) and 215-218 (2011 downtrend). The key initial support rises to 194-197, 192, and then 183-188. WTI Crude continues to challenge key resistance 66.5-68 (2019, 2020, and 2021 highs), and above this to 75-77 (2008 downtrend, late-2014). Initial support is 60.5-63 and then 57-58. Gold is challenging the key resistance at 1,854-1,861 (200-day ma and top of the Aug 2020 downtrend channel).
Currencies – US Dollar (USD) attempt to bottom via three higher lows (1/26, 2/25, and 5/11/21 at 89.17, 89.68, and 89.95, respectively) is now in jeopardy, as a 4-mo head and shoulders top has developed. EURUSD continues with its 9-mo head/shoulders top pattern as it tests the left/right shoulders at 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 0.9095-0.9144 (3/15, 4/9, 5/3, and 5/11/21 lows) and 0.9304 (4/23/21 high).
S&P 500 Sectors – S&P sector rotations show an increase in volatility. Real Estate (XLRE), Industrials (XLI), and Material (XLB) remain in the Leading Quadrant. Financials (XLF) slipped into the Weakening Quadrant to join Communication Services (XLC) and Energy (XLE). Healthcare (XLV) joins Utilities and Consumer Staples (XLP) within the Improving Quadrant. Technology (XLK) and Consumer Discretionary (XLY) remain confined to the Lagging Quadrant, with XLY is turning around and close to moving into the Improving Quadrant.
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