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Technical Report for the Week of 06/29/20

Updated: Jun 30, 2020

Technical Summary

Equities – Although a retest of its all-time high (3,393.52) is still possible, a negative outside week (6/8/20), a bearish island reversal (6/11/20), a negative outside day (6/19/20), and another bearish island reversal (6/24/20) warns of a correction to key initial support at 2,980-3,021 (50-day ma and 200-day ma), and below this to 2,946-2,966 (5/26/20 gap-up breakout and 6/15/20 low), and then to 2,835-2,914 (38.2% retracement from Mar-Jun 2020, 4/21/20 uptrend, and 5/18/20 gap up). The spread (40.87) between 50-day ma (2,980) and 200-day ma (3,021) continues to contract. This hints of an impending major battle between the bulls and bears. A golden cross buy signals the resumption of the Mar 2020 recovery. Failure of the 50-day ma to cross above the 200-day ma warns of the next major correction. An inside week on 6/22/20 also suggests market uncertainties.

Fixed Income – Copper/Gold ratio (CGR) and the 10-year US Treasury yields (TNX) have strong historical correlations. Does the Mar 2020 CGR rebound from major support (1980 and 1987 lows) hint of a major TNX bottom? Nonetheless, 10-year and 30-year US Treasury yields (TNX and TYX) have generated recent bearish island reversals on 6/9/20 and have also struggled to convincingly breakout above key resistances at 1.76-1.83% and 0.957-0.989%, respectively. This warns of consolidations to key supports. For TYX it is 1.39%, 1.126-1.251%, and then 0.837%. For TNX it is 0.648-0.651%, 0.543-0.581%, and then 0.398%.

Commodities – CRB Index has encountered key initial resistance at 134.48-144.67 (38.2-50% retracement from the Jan-Apr 2020 decline). Key initial support is at 131.5-133.5, and below this to 127.5-129, 124-126, and then to 118.5-121. WTI Crude Oil has generated a positive outside week (6/15/20). However, key resistance remains at 41-43 (Mar 2020 h/s top breakdown, 61.8% retracement from the Jan-Apr 2020 decline, and the pivotal 30-wk ma). Gold has also generated a positive outside day (6/26/20). It continues to consolidate its gains via a 3-mo triangle pattern between 1,666-1,672 and 1,789-1,796.

Currencies – US Dollar Index (USD) continues to struggle to clear above key initial resistance at 98.27-98.66 (200-day and 50-day ma). Key initial support remains near 94.61-95.71 (Mar/Jun 2020 lows). EURUSD has improved but recent failure to breakout above key resistance (1.1422-1.1493) warns of a correction to key initial support at 1.104-1.107 (50-day, 200-day, and the 10-mo ma). JPYUSD remains confined to a neutral trading range between key initial support at 0.923-0.931 (50-day and 200-day ma) and key initial resistance at 0.9427-0.947 (May and Jun 2020 highs).

S&P 500 Sectors In the past 8 weeks ending on June 22, 2020, SPX continues with its corrective phase. Healthcare (XLV 0.1%) has slipped deeper into the Weakening Quadrant. This suggests a healthy near-term consolidation. Technology (XLK 14.5%), Communication Services (XLC 6.0%), and Consumer Discretionary (XLY 10.5%) retain their leadership roles within the Leading Quadrant. Consumer Staples (XLP -0.1%), Utilities (XLU -0.4%), and Real Estate (XLRE 3.4%) continue to weaken further within the Lagging Quadrant. Financial (XLF 3.0%), Energy (XLE 3.1%), Industrials (XLI 6.7%), and Materials (XLB 7.9%) continue to improve within the Improving Quadrant. XLB appears to be gaining technical strength in recent weeks and is poised to move into the Leading Quadrant.

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