Equities – A 3-day pullback led to SPX finding key support at 4,233.13 (7/19/21) or near the 50% retracement from the May-Jul 2021 rally. The recent breakout above 4,393.68 hints of 160.53 points or the next SPX rally to 4,453-4,462 (top of May 2021 uptrend channel), 4,554-4,615 (Breakout target, top of the Nov 2020 channel, and the V-pattern breakout target), and 4,662 (May 2021 channel breakout target). Key initial support rises to 4,370-4,394 (7/23/21 gap-up breakout and 7/27/21 low), and below this to 4,302 (bottom of May 2021 uptrend channel), 4,233 (7/19/21 low), 4,164-4,168 (Jun 2021 lows), and 4,057-4,061 (May 2021 lows).
Fixed Income – The steepening of the 10-year minus 3-mo US treasury yield spread has contracted to key support at 1.14-1.23 (prior breakout and the 200-day ma). Will this support hold? US yields, including 30-year, 10-year, 5-year, 3-year, and 2-year have broken down. Is this a near-term consolidation or the start of normalization in US interest rates? The monthly ROC indicator plummeted to an extreme low (oversold) in March 2020 (0.536%). It has since rebounded to an extremely high level (overbought). Will TNX now transition toward a less volatile trading range between 1.0% and 1.75%?
Commodities – CRB Index has broken several pivotal resistances, suggesting the next CRB rally to 233.5-244 and 267-287. Initial support is 210.5 (50-day ma), 200-205, and 192. WTI Crude Oil continues to test 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 is testing key initial resistance at 1,822-1,837.5 (50-day/200-day ma and 7/29/21 high), above this to 1,919-1,923/1,944-1,962.5. Key support is 1,750 or the Jun 2021 low.
Currencies – US Dollar continues to bottom via two higher-low patterns. Key resistance remains at 93.19-93.47, and above this, to 94.61-94.82. Initial support rises to 91.42-91.51 (50-day/200-day ma) and 89.17-89.51. EURUSD continues with a head and shoulders top or triangle pattern. Key resistance is 1.1197-1.20 (50-day/200-day ma) and 1.2243-1.2266/1.2349. Key support is 1.1703-1.1752 and 1.1605. JPYUSD is attempting to create a bottom. Key resistance is 0.909-0.9169 and 0.9304-0.934 (200-day ma). Key support remains at 0.8956-0.9012.
S&P 500 Sectors – RRG sector studies show a few changes from the prior week. Technology (XLK) joins Communication Services (XLC) and Real Estate (XLRE) in the Leading Quadrant. Consumer Discretionary (XLY) joins Consumer Staples (XLP) and Healthcare (XLV) in the Improving Quadrant. Financials (XLF) and Energy (XLE) continues to weaken within the Weakening Quadrant. Industrials (XLI) and Materials (XLB) slipped into the Lagging Quadrant joining Utilities (XLU). Market breadth has narrowed as only 3 S&P sectors (XLY, XLK, and XLC) have rising tails, implying a sector and stock selective market environment.
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