Technical Report for the Week of 07/13/20
Equities – Over the past 1-plus month SPX has been confined to a trading range between key initial support at 2,946-3,000 corresponding to the bottom of May 2020 triangle, 5/18/20 breakout, and Jun 2020 lows and 3,184-3,233.13 coinciding with the top of May 2020 triangle, and Jun/Jul 2020 highs. On a positive note, a daily golden cross buy signal developed this past week as the 50-day ma (3,034) has crossed above the 200-day ma (3,027). On the weekly chart, a weekly golden cross buy signal has also been recorded. A convincing move above 3,233.13 confirms a technical breakout, and suggests +267.5-points or the next SPX targets to 3,260-3,328.5 (2/24/20 gap down), and above this to 3,338-3,393.52 (1/22/20 and 2/19/20 all-time highs), and then to 3,500 (triangle breakout target). Key initial support rises to 3,027-3,034 or the 200-day and the 50-day ma. Secondary support is also at 2,946-3,000 or bottom of May 2020 triangle, 5/18/29 breakout, and Jun 2020 lows.
Fixed Income – 30-year and 10-year US Treasury yields (TYX and TNX) have developed bearish island reversals on 6/9/20. In addition to the above technical developments, 3-month head/shoulders tops have appeared on the daily charts. Failed breakouts above key resistances at 1.76-1.83% (TYX) and 0.957-0.989% (TNX), warn of key tests of neckline supports. Below 1.251% (TYX) warns of a retest of the Mar 2020 reaction low of 0.837%. Below 0.543-0.581% (TNX) warn of a decline to the Mar 2020 reaction low of 0.398%.
Commodities – CRB Index continues with its recovery and it tests next resistance at 144.67 (50% retracement from Dec 2019-Apr 2020 decline). Key initial support rises to 139.5-140, and below this to 132.5-133.5, 125-128, and then to 118.5-121. WTI Crude Oil is also challenging key resistance at 40-43 (Mar 2020 h/s top breakdown, 61.8% retracement from the Jan-Apr 2020 decline, and the pivotal 30-wk ma). Gold has broken out of a 3-mo triangle pattern above 1,776-1,789. This suggests +123 points or a Gold target to 1,899-1,912. Initial support rises to 1,743-1,776.
Currencies – USD continues to struggle to clear key initial resistance at 98-98.25 (200-day and 50-day ma). Key initial support now rises to 94.61-95.71 (Mar/Jun 2020 lows) EURUSD has strengthened but still needs to clear above key resistance at 1.1422-1.1493 (Mar/Jun 2020 highs) to confirm the breakout. Key initial support is at 1.105-1.111 (50-day, 200-day, and 10-mo ma). JPYUSD retains a neutral trading range between key initial support at 0.923-0.931 (50-day and 200-day ma) and key initial resistance at 0.9427-0.934/0.9471-0.9563 (May/Jun 2020 and Jan/Aug 2019 highs).
S&P 500 Sectors – S&P 500 sector rotations appear to be balanced as 3-4 sectors are each confined to the Leading, Lagging, and Improving quadrants. This reinforced the trend that investors remain sector and stock selective. The fact that many of the economically sensitive S&P sectors reside within the Leading and Improving Quadrants is constructive as implies the US economic recovery can still recover and SPX can sustain higher prices into the summer months. Sectors to monitor over the near-term – Energy (XLE) sector has peaked, and this warns of further downside risks. Healthcare (XLV) continues to correct within the Weakening Quadrant suggesting buying opportunities for long-term investors. Technology (XLK), Communication Services (XLC), Consumer Discretionary (XLY), and Materials (XLB) retain leadership roles.
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