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Technical Report for the week of 06/27/22

Equities – The primary trend for SPX is the Jan 2022 downtrend channel as defined by 3,730 and 4,457. A fourth oversold rally from 6/17/22 low (3,636.87) nears key resistance at 3,907-4,017, 4,066-4,088 and 4,177.5-4,228. It is another mid-term election, and a major 4-year stock market bottom can develop during the second half. If the current January market decline is a cyclical bear within a secular/structural bull trend, then SPX must maintain above long-term support at 3,200-3,600, coinciding with several technical convergences.

Fixed Income – The 10-year minus 3-mo yield spread is contracting in line with the 10-year minus 2-year spread. Support is 1.40 (Mar 2022 lows) and resistance is 1.54-1.63 (200-day ma). The 10-year minus 2-year spread inverted in Apr 2022 (-0.06). In the past, an inversion warns of the US recession. Does this imply a recession as early as December 2022 to February 2023? TNX nears structural resistance at 3.04-3.25%. However, failure to convincingly breakout can lead to consolidation between 1.25-1.75% and 3.0-3.25%.

Commodities – CRB recently faded near the 61.8% retracement from the 2008-2020 decline (332). An overbought condition coupled with a violation of the 50-day ma (312) warns at consolidation to support at 293-297, 280.5, and 266-270. WTI Crude can still rally to 130.50 (3/7/22 high) and above this 147/140 (2008 record highs) and 161-167 (top of 2020 uptrend channel). Support is 98-101.5, 93.5-95, 91, and 85-87.5. Gold consolidates between support at 1,781-1,806 and resistance at 1,867-1,882.5.

Currencies – US Dollar breakout above 103.82-103.96 suggests 105-105.5, 107-108.5, 118-118.5, and 120-121. Support is 101.5-103, 97.5-98, and 95.25. EURUSD rebounds from neckline support at 1.0339-1.0456. Initial resistance is 1.060-1.0642, 1.0774-1.0787, 1.0934-1.0936, 1.112-1.121, and 1.1483-1.1495. 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 – RRG study shows significant rotations in the past week. Industrial (XLI), Healthcare (XLV), Consumer Staples (XLP), and Materials (XLB) remain in the Leading Quadrant, with XLV, XLP, and XLB weakening. Utilities (XLU) and Energy (XLE) join Real Estate (XLRE) in the Weakening Quadrant. Technology (XLK) joins Communication Services (XLC) in the Improving Quadrant. Financials (XLF) and Consumer Discretionary (XLY) reside within the Lagging Quadrant, with XLF improving.

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