Technical Report for the Week of 07/19/21
Equities – The SPX Index (SPX) retains its Nov 2020 uptrend channel between 4,262 and 4,526-4,554. The recent breakout above 4,2,38-4,257 still renders SPX targets to 4,434-4,453 (near-term), 4,526-4,554 (medium-term), and 4,595-4,774 (intermediate-term). However, a negative outside day on 7/16/21 warns of a near-term consolidation. The prior SPX rally (5/19-6/14/21) and subsequent correction found key support near its 50% retracement. Will the 6/18-7/13/21 rally and the recent correction also find key support near the 38.2%, 50%, and 61.8% retracements at 4,305, 4,278, and 4,251, respectively?
Fixed Income – In 3 previous U.S. yield curves steepening, two occurrences led to U.S. recessions and SPX bear declines (2000-2002 and 2007-2009). A third occurrence (2013) resulted in neither a U.S. recession nor an SPX bear decline. The key initial support is 1.16-1.24. TYX and TNX continue to diverge – on the rallies and corrections. TYX has violated its 200-day ma (1.96%), while TYX still maintains above its 200-day ma (1.256%). 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 215.5-217.72 (2011 downtrend and 7/1/21 high). A breakout suggests 234-236, 243.67, and 267.87. Initial is 208.5-209 (10-wk/50-day ma) and 193-196/182-183. WTI Crude Oil is challenging key resistance at 75-77 (2008 downtrend, Oct 2018 highs, and the 50% retracement from Jun 2008-Apr 2020 decline). Initial support is 69.7-70.25, 67-68, 60.5-62.5, and 55.5-57.25. Gold declined to 1,750.10 or the right shoulder of a head/shoulders bottom. Initial resistance is 1,829-1,838 and 1,919-1,926/1,950-1,962.5.
Currencies – U.S. Dollar continues with its attempt to negate a 7-month head/shoulders top and establish a firmer bottom. Key resistance is 92.84-93.47 and 94.33-94.82. Initial support is 91.06-91.47 (50-day/200-day ma). EURUSD continues with an 11-mo head/shoulders top or a triangle. Key resistance is 1.2243-1.2266/1.2349. Key support is 1.1605, 1.1703, and 1.1782 (11/4/20, 3/31/21, and 7/7/21 lows). JPYUSD continues to struggle to confirm the 0.9012-0.8956 Mar/Jul 2021 lows. Key initial resistance is 0.910/0.9304 (50-day ma & 4/23/21 high).
S&P 500 Sectors – RRG sector studies show a slight tilt toward a defensive stance from the prior week. Only 2 of the 11 S&P sectors (i.e., Communication Services (XLC) and Real Estate (XLRE)) are residing within the Leading Quadrant and 3 sectors (i.e., Technology (XLK), Consumer Staples (XLP), and Healthcare (XLV)) are in the Improving Quadrant. With 6 S&P sectors in the Weakening and Lagging Quadrants, this suggests a near-term consolidation and sector and stock selectivity over the near-term. Materials (XLB), Industrials (XLI), Financials (XLF), and Energy (XLE) continue to decline further within the Weakening Quadrant. Utilities (XLU) and Consumer Discretionary (XLY) remain confined to the Lagging Quadrant.
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