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Technical Report for the Week of 07/17/23

Technical Summary

Equities – SPX – The 7/12/23 gap-up negates the Jul 2023 bearish island reversal and extends the SPX intermediate-term rally toward 4,546-4,582 (Sept 2021 highs, top of Mar 2023 uptrend channel, and 5/30/23 breakout target), and above this 4,637 (Mar 2022 highs), 4,818.62 (Jan 2022 record high), 4,823, and 5,159. Initial support is 4,444-4,463 (7/12/23 gap-up) and below 4,311-4,328 (6/12/23 breakout, 6/26/23 low, and the bottom of the Mar 2023 uptrend channel), 4,284.5 (50-day ma), and 4,195.44 (5/30/23 breakout).

Fixed Income – TNX minus 3-month Treasury yield – The spread fell to -1.89 (5/4 and 6/1/23) before rebounding to -1.40, failing at key initial resistance (-1.32 - Jan 2023 lows). Initial support is -1.78 to -1.67 (50-day ma, Apr, and 6/26 lows). Fed Funds and 2-year US Treasury yield near their respective Feb 2007 and Jun 2006 tops. Will another 2 Fed hikes totaling 50bps end the Fed tightening process? TNX – Above the top Sept/Oct 2022 downtrend channel (3.12% and 3.86%) hints at a breakout. TNX must maintain key support at 3.705-3.713%.

Commodities – CRB – The recovery nears the top of the 1-year downtrend channel remains between 247 and 271. Initial support rises to 259-262 (50-day ma) and 256.5-247/254. WTI Crude – The 2022 downtrend channel is 57 and 77.5. Failure to clear 77.5 (downtrend and 200-day ma) warns of a pullback to 74-75 and 71.5 (Jun 2023 breakout and 50-day ma). Gold – Recent recovery from 1,900.6 nears key resistance at 1,970-1,975 and 2,003 (200-day ma, Feb/Jun 2023 highs, and Apr 2022 highs).

Currencies – USD – A neckline breakdown below 100.42-100.68 confirms h/s top and a decline to 99.15 (61.8% retracement) and then the mid-90s (78.6% retracement). Initial resistance is 100.42-101.49/102.5-103. EURUSD – Dec 2022 downtrend breakout and above 1.11-1.13 confirms an intermediate trend reversal and suggests 1.1489-1.1495. Initial support is 1.1033-1.1096 and 1.087. USDJPY – A 7/14/23 positive outside day (7/14/23) signals a key test of support at 137.26-138 (200-day ma). Resistance is 140-141 and 145.

S&P 500 Sectors – RRG study shows strengths in four sectors, including Consumer Discretionary (XLY) and Technology (XLK) in the Leading Quadrant and Financial (XLF) and Industrial (XLI) in the Improving Quadrant. Communication Services (XLC) continues to weaken within the Weakening Quadrant. Healthcare (XLV), Utilities (XLU), Consumer Staples (XLP), Materials (XLB), Real Estate (XLRE), and Energy (XLE) remain in the Lagging Quadrant. XLB and XLRE show signs of strengthening via relative momentum.

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