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Technical Report for the Week of 06/06/22

Updated: Jun 7, 2022

Technical Summary


Equities – The ability of SPX to rebound from key support at 3,810-3,837 has triggered another oversold SPX rally to pivotal medium-term resistance at 4,195.5-4,249 (38.2% retracement from Jan-May 2022 decline, 50% retracement from Mar-May 2022 decline, and 50-day ma). A breakout renders a retest of 4,307.5-4,321, 4,433.5-4,513, and 4,818.62 (Jan 2022 all-time high). Initial support rises to 4,062.5 (5/2/22 low) and below this 3,859-3,810/3,789 (5/12 and 5/20/22 reaction lows and bottom of Dec 2021 downtrend channel).


Fixed Income – The 10-year minus 3-mo yield spread has diverged from the more popular 10-year minus 2-year yield spread. A rally to 2.27 (4/6/22) led to consolidation to 1.66 or near the 200-day ma (1.60). The 10-year minus 2-year spread inverted during Apr 2022 at -0.06. The inversion warns of a US recession as early as Dec 2022-Feb 2023.TNX nears structural resistance at 3.0-3.25% (top of the 1980 downtrend and the 2013/2018 highs). Failure to breakout and an oversold condition may lead to a multi-year consolidation.


Commodities – CRB enters a commodities super cycle like 1971-1980. Next resistance is 313/321.5-326 (2012/2014 highs) and 332-338 (61.8% retracement from 2008-2021 decline). Initial support is 315.95, 307-309, 293-297, 286, 280.5, 269.5, and 259-263. WTI Crude tests resistance at 107-114/130.50 (2011/2013/Mar 2022 highs) and 147/140 (2008 record highs). Initial support is 115.5, 111, 103-106, 98-100, and 92-95. Gold rebounds from key support at 1,1,70-1,806.5 (30-mo ma and Jan/May 2022 lows).


Currencies – CRB enters a commodities super cycle like 1971-1980. Next resistance is 313/321.5-326 (2012/2014 highs) and 332-338 (61.8% retracement from 2008-2021 decline). Initial support is 315.95, 307-309, 293-297, 286, 280.5, 269.5, and 259-263. WTI Crude tests resistance at 107-114/130.50 (2011/2013/Mar 2022 highs) and 147/140 (2008 record highs). Initial support is 115.5, 111, 103-106, 98-100, and 92-95. Gold rebounds from key support at 1,1,70-1,806.5 (30-mo ma and Jan/May 2022 lows).


S&P 500 Sectors – Rotations continue to favor select defensive and commodities sectors. Real Estate (XLRE), Industrial (XLI), Healthcare (XLV), Utilities (XLU), Consumer Staples (XLP), Energy (XLE), and Materials (XLB) remain in the Leading Quadrant. XLB, XLE, and XLP show strong relative price momentums. Communication Services (XLC) improves within the Improving Quadrant. Financials (XLF), Technology (XLK), and Consumer Discretionary (XLY) reside within the Lagging Quadrant, with XLF and XLK showing improving relative momentum.


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