Technical Report for the Week of 06/20/22
Equities – It is another mid-term election. A major 4-year stock market bottom is possible. If the current January market decline is a cyclical bear within a secular/structural bull trend, then SPX will need to find a sustainable bottom near its long-term support at 3,200-3,600. The primary trend for SPX Index since the market top on 1/4/22 (4,818.62) is the downtrend channel, as defined by 3,742 and 4,473. Any rallies will be short-lived oversold rallies until a confirmed bottom appears. Initial resistance is 3,838-3,907, 3,971-4,017, and 4,088-4,091.
Fixed Income – 10-year minus 3-mo yield spread rallied to 2.27 (4/6/22) before consolidating. Decline to 1.66 retests the pivotal support near 200-day ma (1.62). The 10-year minus 2-year spread inverted in Apr 2022 (-0.06). In the past, an inversion warns of the US recession. Will a recession occur during Dec 2022-Feb 2023? TNX challenges structural resistance at 3.04-3.25% (top of the 1980 downtrend and 2013/2018 highs). Failure to breakout coupled with an oversold condition suggests a multi-year consolidation.
Commodities – CRB enters a commodities super cycle. Next resistance is 332-338 (61.8% retracement from 2008-2021 decline). An overbought condition hints at consolidation to support near 307-309, 293-297, 280-281, 267, and 264-265. WTI Crude can still rally to 130.50 (3/7/22 high) and above this 147/140 (2008 record highs) and 154-155 (top of 2020 uptrend channel). Initial support rises to 102.5-103, 98-100, and 93.5-95. Gold’s key initial support and resistance are 1,780-1,806 and 1,877-1,882.5.
Currencies – US Dollar breakout above 103.82-103.96 renders targets at, 105.07 (May 2022 high), 108.5, and 118.5-121. Support rises to 105-105.5, 101.5-103, and 97.5-98. EURUSD rebounds from neckline support at 1.0339-1.0456. Initial resistance is 1.0601-1.0652, 1.0774-1.0787, 1.0934-1.0936, 1.112-1.121, and 1.148-1.1495. JPYUSD is testing 0.740 or the 2002 reaction low. An oversold rally can lead to a retest of initial resistance at 0.7605-0.772, 0.7914-0.7995, 0.838-0.8595, and 0.8812-0.8886.
S&P 500 Sectors – Rotations favor select defensive and commodities sectors. Industrial (XLI), Healthcare (XLV), Utilities (XLU), Consumer Staples (XLP), Energy (XLE), and Materials (XLB) remain in the Leading Quadrant. XLI shows price momentum but the others in the Quadrant weakened. Communication Services (XLC) remains in the Improving Quadrant. Real Estate (XLRE) declines into the Lagging Quadrant. Financials (XLF), Technology (XLK), and Consumer Discretionary (XLY) reside in the Lagging Quadrant, with XLF/XLK strengthening.
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