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Technical Report for the Week of 07/31/23

Equities – SPX – Breakouts of pivotal resistances at 4,195.44 and 4,325.28, respectively, confirm an intermediate-term trend reversal and hint at a retest of Jan 2022 all-time high (4,818.62). However, a negative outside day (4,607 – 7/27/23) and failure to clear the top of the Mar 2023 uptrend channel (4,633) warns of near-term consolidation. Initial support remains 4,444-4,463 (7/12/23 gap-up) and 4,398-4,422 (6/30/23 gap-up). Secondary support also moves to 4,371-4,374 (50-day ma and the bottom of the Mar 2023 uptrend channel).

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 -1.74 and -1.89. Fed Funds and 2-year US Treasury yield near their respective Feb 2007 and Jun 2006 tops. Is the Fed finished with its tightening process? TNX – Above the top of the Sept/Oct 2022 downtrend channel (3.84%) and 4.091-4.094% hints at a trend reversal. Initial support rises to 3.71-3.79% (50-day and 200-day ma).

Commodities – CRB – A breakout above the top of the 1-year downtrend channel (269), 200-day ma (270), and Jan/Apr 2023 highs confirm a reversal. Initial support is 269-270 (200-day ma and downtrend). WTI Crude – Above 76-77 (top of 2022 downtrend channel and 200-day ma) and 81-83.5 (Dec 2022 and Jan/Feb/Mar/Apr 2023 highs) reaffirm trend reversal. Initial support is 76-77 (breakout and the 200-day ma). Gold – Recovery nears key resistance at 1,990-2,003 (Apr 2022 and Feb, Jun, and Jul 2023 highs. Initial support is 1,936-1,942/1,901.

Currencies – USD – A neckline breakdown below 100.42-100.68 and a violation of 99.15 (61.8% retracement) warns of a top. A trading range has developed between 100.42-100.52 and 102-103.25. EURUSD –2022 downtrend breakout and golden cross buy signal suggest a trend reversal. The recent rally faded at 1.1276 (7/18/23), or 61.8% retracement from the 2020-2022 decline. Initial support is 1.0834-1.0916. USDJPY – A consolidation has developed between 137-138 (200-day ma and Jul 2023 lows) and 141-142 (50-day ma).

S&P 500 Sectors – RRG study remains the same, with four sectors showing strengths, including Consumer Discretionary (XLY) and Technology (XLK) in the Leading Quadrant and Financial (XLF) and Industrial (XLI) in the Improving Quadrant. Communication Services (XLC) weakens in the Weakening Quadrant. Healthcare (XLV), Utilities (XLU), Consumer Staples (XLP), Materials (XLB), Real Estate (XLRE), and Energy (XLE) remain in the Lagging Quadrant. XLB, XLRE, and XLE near the Improving Quadrant.

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