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Technical Report for the Week of 07/10/23

Equities – SPX – Breakouts on 5/30/23 above 4,195.44 and 6/12/23 above 4,325.28 solidify the Oct 2022 low (3,491.58) as a market bottom and suggests SPX rally to 5,525, 4,546- 4,582, 4,637, 4,771-4,818.62, and 5,159. Although the 6/30/23 bullish island reversal is favorable, a bearish island reversal on 7/6/23 warns of another consolidation. Initial support is 4,325-4,328 (6/12/23 breakout and 6/26/23 low) and 4,251-4,286 (50-day ma and bottom of Mar 2023 uptrend channel), and 4,195.44 (5/30/23 break out).

Fixed Income – TNX minus 3-month Treasury yield – The spread fell to -1.89 (5/4 and 6/1/23), prompting another oversold rally to key initial resistance at -1.32 (Jan 2023 lows), and above this -0.99 to -0.83 (Mar 2023 high and 200-day ma). Fed Funds and 2-year US Treasury yield near their respective Feb 2007 and Jun 2006 peaks. Will another 2 Fed hikes totaling 50bps end the Fed tightening process? TNX – The Sept/Oct 2022 downtrend channel (3.13% and 3.903%) reversal and surge above 4.09% (3/3/23 island reversal) reaffirm the breakout.

Commodities – CRB – A 1-year downtrend channel remains between 247 and 271. Initial support is 256.5-259/254 (early May/late Jun 2023 lows/Mar and May 2023 lows). Initial resistance is 270-271 (200-day ma). WTI Crude – The 2022 downtrend channel remains between 58 and 78. Initial resistance is 75-76 (May/Jun 2023 highs) and 77.5-81.5/83.5-85.5. Initial support is 67 and 63.5-64. Gold – After peaking at 2,085.40 (5/4/23), a recovery from 1,900.6 hints at the bottom. Initial resistance remains at 1,936-1,943 and 1,975-2,003.

Currencies – USD – A 1-year h/s top with a neckline at 101.42-101.49/100.42-100.68 (May 2022/Jun 2023 lows, and Feb/Apr 2023 lows). Resistance is 104.5-106 (200-day ma and Jan/Mar/May 2023 highs). EURUSD – Dec 2022 downtrend breakout signals a bottom. A 4/14/23 negative outside day lead to a key test of 1.0483-1.061 (Jan, Feb, Mar, May 2023 lows/200-day ma). USDJPY – Above key resistances at 137-138, 139.38-139.75, and 142.60 negated a H/S top and suggests a rally to 145.90. Initial support rises to 139.72/137.5-138.

S&P 500 Sectors – RRG study shows strengths in two sectors. Consumer Discretionary (XLY) and Technology (XLK) remain in the Leading Quadrant. Financial (XLF) has moved into the Improving Quadrant. Communication Services (XLC) continues to weaken in the Weakening Quadrant. Financial (XLF), Healthcare (XLV), Utilities (XLU), Consumer Staples (XLP), Materials (XLB), Real Estate (XLRE), Energy (XLE), and Industrials (XLI) remain in the Lagging Quadrant. XLI is close to moving into the Improving Quadrant.

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