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Technical Report for the Week of 05/29/23

Technical Summary

Equities – SPX – A technical base from May/Aug 2022 is technically constructive and hints at a potential breakout. Above 4,325.44 (8/16/22 reaction high) suggests 386.58 points or a medium-term SPX target of 4,582. The ability of SPX to rebound from critical initial support at 4,048-4,049 (4/26 and 5/4/23 lows) and the 50-day ma (4,100) sets the stage for a retest of 4,195-4,213 (2/2 and 5/19/23 highs). A breakout suggests 138.64 points or 4,334, or intermediate-term resistance at 4,308-4,325 (61.8% retracement from Jan-Oct 2022 and 5/4 and 8/16/22 highs).

Fixed Income – TNX minus 3-month Treasury yield – The spread fell to -1.89 (5/4/23), prompting another oversold rally toward key initial resistance at -1.54 to -1.32 (Jan 2023 lows and the 50-day ma), and -0.83 to -0.74 (Mar 2023 high and 200-day ma). Fed Funds and 2-year US Treasury yield – Both interest rates near their respective Feb 2007 and Jun 2006 peaks. Is the Fed no longer behind the curve? Is the Fed nearing the end of its tightening process? TNX – The Sept/Oct 2022 downtrend channel remains intact between 3.19% and 3.93%.

Commodities – CRB – A 1-year downtrend channel continues between 249 and 274. Initial support is 254-256.5 (Mar and May 2023 lows), and initial resistance is 263.5-265 (Sept 2022 and Jan 2023 lows and 50-day ma). WTI Crude – The 2022 downtrend channel between 60 and 80 continues. Oversold rally nears initial resistance at 74.5-76.25 (50-day ma). Initial support is 70-71/62-64. Gold – Consolidation nears key support at 1,940-1,975 (Mar 2023 breakout, Feb 2023 highs, and extension of Mar/Apr 2022 downtrends).

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) remains. A positive outside day on 4/14/23 suggests an oversold rally toward 105-106. EURUSD – Dec 2022 downtrend breakout hint at a bottom. A negative outside day (4/14/23) warns at consolidation to 1.0735-1.085 and 1.047-1.0524. USDJPY – A head and shoulders top with the neckline at 126.36-127.49 (May 2022 and Jan 2023 lows). Above 137-139 (200-day ma and left/right shoulder) negates a head/shoulders top.

S&P 500 Sectors – RRG study continues to show wide discrepancies between sectors. Five sectors remain in the Lagging Quadrant, including Materials (XLB), Real Estate (XLRE), Financial (XLF), Energy (XLE), and Industrials (XLI). XLB, XLI, XLE, and XLF continue to improve, and XLRE weakens. Healthcare (XLV) and Consumer Staples (XLP) remain in the Improving Quadrant. Consumer Discretionary (XLY) joins Technology (XLK) and Communication Services (XLC) in the Leading Quadrant.

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