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Technical Report for the Week of 07/12/21

Updated: Jul 12, 2021

Technical Summary

Equities – The SPX Index continues with its Nov 2020 uptrend channel (4,240 and 4,484-4,507). A breakout above 4,238-4,257 renders the next SPX targets to 4,434-4,453 (triangle breakout target), 4,484-4,507 (top of the Nov 2020 uptrend channel), and 4,595-4,774 (Nov 2020 V-pattern breakout and channel breakout targets). Key initial support rises to 4,221-4,257 (6/24/21 breakout, 50-day ma, and the bottom of Nov 2020 uptrend channel). Violation here coupled with a breakdown below 4,161.41 (May 2021 lows) warns of a deeper correction to 4,061 (May 2021 lows), 3,950-3,984 (Mar 2021 breakout), 3,853.5-3,864 (200-day ma and 3/25/21 low), and 3,694-3,723 (1/29 and 3/4/21 lows).

Fixed Income – In 3 previous yield curves steepening, two occurrences led to U.S. recessions and SPX bear declines (2000-2002 and 2007-2009). However, a third occurrence (2013) resulted in neither a U.S. recession nor an SPX bear decline. TYX and TNX continue to diverge – on the rallies earlier in the year and the recent corrections. TYX has violated its 200-day ma (1.96%), while TYX still maintains above its 200-day ma (1.239%). Currently, TYX/TNX has fallen to different retracements. TYX at the 50% retracement (Apr 2020-Mar 2021 rally) and TNX at 38.2% retracement.

Commodities – CRB Index is testing key resistance at 215 (2011 downtrend). Above this suggests 234-236, 243.67, and 267.87. Initial support rises to 207-208 (10-wk/50-day ma) and 195-196. WTI Crude Oil is also challenging key resistance at 75-77 (2008 downtrend, Oct 2018 highs, and the 50% retracement from Jun 2008-Apr 2020 decline). Initial support rises to 69.5-71, 67-68, 60.5-62, and 55.5-57. Gold’s bearish flag/pennant pattern still warns of further volatility. Below 1,750 confirms a breakdown. Key initial resistance is 1,830-1,835 (50-day/200-day ma).

Currencies – US Dollar attempts to negate a 6-month head/shoulders top and establish a bottom. Key resistance is 92.84-93.47 and 94.33-94.82. Initial support is 90.91-91.51 (50-day and 200-day ma). EURUSD is converging toward a 10-mo head/shoulders top or triangle pattern. Key resistance is 1.2243-1.2266, and 1.2349. Key support is 1.1605/1.1703/1.1782 (11/4/20, 3/31/21, and 7/7/21 lows). JPYUSD has rebounded from the key support at 0.8956-0.9012 (Mar/Jul 2021 lows). Key initial resistance is 0.911 (50-day ma) and then 0.9304 (4/21/21 highs).

S&P 500 Sectors – RRG sector studies show an increase in sector rotations from the prior week. Communication Services (XLC) joins Real Estate (XLRE) in the Leading Quadrant. Materials (XLB) fall into the Weakening Quadrant, joining Industrials (XLI), Financials (XLF), and Energy (XLE). XLE has been showing strong price momentum, and if this trend continues, XLE can move into the Leadership Quadrant. Technology (XLK) has recovered and is now in the Improving Quadrant, joining Healthcare (XLV) and Consumer Staples (XLP). Utilities (XLU) has slipped into the Lagging Quadrant and joins Consumer Discretionary (XLY).

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