Equities – The May-July rally of 8.30% created an overbought condition, leading to a 3-day decline to key initial support at 4,233.13 (7/19/21) or the 50% retracement from its 2-plus month rally. The ability to rebound from the 50% retracement hints at consolidation (3-5% decline) rather than a correction, deep correction, or bear decline. The recent 4.30% rally in the past 4-days has resulted in SPX establishing another record high above 4,393.68 (7/14/21 high). The breakout suggests +160.54 points or the next SPX target at 4,434-4,453 (top of May 2021 uptrend channel), 4,554-4,578 (breakout target), and then 4,594-4,595 (channel and V-breakout targets).
Fixed Income – The 10-year minus 3-mo yield spread completed a cup and handle breakout above 1.09-1.16. The breakout suggests a steepening yield curve that expanded to 1.73, prompting an oversold condition that has now contracted toward key support at 1.14-1.22 (prior breakout and 200-day ma). US 10 and 30-year Treasury Yields (TNX and TYX) recorded all-time monthly lows of 0.536% and 1.198% before rebounding sharply. The one-year rebound and the recent pullbacks are converging toward key supports at 1.286% (TNX) and 1.988-2.015% (TYX).
Commodities – CRB Index continues to test 213-217.72 (2011 downtrend and 7/1/21 high). A breakout suggests 234-236, 233.5-244, and 267.87. Initial is 209 (50-day ma), 200-205, and 192. 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 is 70-71, 67-67-68, 60.5-63, and 56.5-57.25. Gold declined to 1,750.10 (support) or the right shoulder of a head/shoulders bottom. Initial resistance is 1,826-1,836 and 1,919-1,926/1,948-1,962.5.
Currencies – US Dollar continues to establish a bottom via two higher low patterns. Key resistance remains at 93.39-93.47, and above this to 94.61-94.84. Initial support rises to 91.25-91.5 (10-wk/30-wk ma), and 89.17-89.51. EURUSD continues with head/shoulders top or triangle. Key resistance is 1.20, 1.2243-1.2266, and 1.2349. Key support is 1.1605, 1.1703, 1.1752 (11/4/20, 3/31/21, and 7/21/21 lows). JPYUSD continues to struggle to confirm a bottom. Key resistance is 0.9169-0.9304 (Apr/Jul 2021 highs), and the key support is 0.8956-0.9012.
S&P 500 Sectors – RRG sector studies show minor changes from the prior week. Two S&P sectors, including Communication Services (XLC) and Real Estate (XLRE), retain their leadership roles within the Leading Quadrant. Three sectors (i.e., Technology (XLK), Consumer Staples (XLP), and Healthcare (XLV)) remain in the Improving Quadrant, with XLK close to moving back to the Leading Quadrant. Materials (XLB) slipped into the Lagging Quadrant joining Utilities (XLU) and Consumer Discretionary (XLY). XLY is gaining momentum and is close to the Improving Quadrant. Industrials (XLI), Financials (XLF), and Energy (XLE) continue to weaken in the Weakening Quadrant.
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