Equities – The 5/20-6/2/22 SPX oversold rally failed near pivotal resistance at 4,195.5-4,223 (38.2% retracement from Jan-May 2022 decline, 50% retracement from Mar-May 2022 decline, and 50-day ma). A breakout would have extended the rally to intermediate-term resistance at 4,433.5-4,483 (61.8% retracement, 200-day ma, and Jan 2022 downtrend). The 6/10/22 gap-down (3,974-4,017) warns of a retest of 3,859/3,810 (5/12 and 5/20/22 lows) and 3,723-3,770 (3/4/21 low and the Jan 2022 downtrend channel). A breakdown signals the next SPX selloff.
Fixed Income – The 10-year minus 3-mo yield spread has diverged from the popular 10-year minus 2-year yield spread. A rally to 2.27 (4/6/22) led to consolidation to 1.66, retesting the 200-day ma (1.61). The 10-year minus 2-year spread inverted during Apr 2022 (-0.06). The inversion warns of a US recession as early as Dec 2022-Feb 2023. TNX nears structural resistance at 3.04-3.25% (top of the 1980 downtrend and the 2013/2018 highs). Failure to breakout coupled with an oversold condition suggests a multi-year consolidation.
Commodities – CRB enters a commodities super cycle like 1971-1980. Resistance is 313/321.5-326 (2012/2014 highs) and 332-338 (61.8% retracement from 2008-2021 decline). Initial support is 316, 307-310, 293-297, 280.5, 269.5, and 265-266/261.5. WTI Crude nears key resistance at 130.50 (3/7/22 high) and above this 147/140 (2008 record highs), and 154-155 (top of 2020 uptrend channel). Initial support is 111-115.5, 103-107, 98-100, and 93-95. Gold’s key support and resistance is 1,780-1,806.5 and 2,079-2,089.
Currencies – US Dollar breakout above 103.82-103.96 suggests next USD rallies to 105.07 (May 2022 high), 108.5, and 118.5-121. Support rises to 101.5-102, 97-98, and 92.5. EURUSD nears pivotal neckline support at 1.0339-1.0456. Violation warns of a top. Initial resistance is 1.0758-1.0807, 1.0934-1.0936, 1.112-1.121, and 1.1483-1.1495. JPYUSD broke neckline at 0.7946-0.8054, suggesting a decline toward 0.740 (2002 reaction low). Initial resistance is 0.67613-0.7995 and 0.838-0.8595, and 0.8812-0.8886.
S&P 500 Sectors – Rotations favored 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. XLI, XLE, and XLP show strong relative price momentums. Communication Services (XLC) remains 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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