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Technical Report for the Week of 08/21/23

Equities –SPX – The mid-October 2022 low at 3,491.58 (10/13/22) marks a market bottom and a 1-year uptrend channel between 4,172 and 4,663. However, three bearish negative outside days (7/27, 8/4, and 8/10/23) and an 8/2/23 gap-down (4,550.93-4,567.53) confirm the end of impulse Wave 3 and the start of corrective Wave 4. The correction should lead to a higher low pattern resulting in impulse Wave 5 toward 4,100-4,300 near the end of August to early October 2023. Initial resistance is 4,448.5-4,453 (6/16 high/50-day ma) and 4,551-4,567.5 (8/2/23 gap-down).

Fixed Income – TNX minus 3-month Treasury yield – Spread nears key resistance at -1.32 to -1.25 (Jan 2023 lows, Jul/Aug 2023 highs, and 200-day ma). Initial support is -1.78 to -1.55 (50-day ma and 6/26 and 7/19/23 lows). Fed Funds and 2-year US Treasury yield approaching the Feb 2007/Jun 2006 highs suggest the Fed nears the end of its tightening process. TNX – A convincing breakout above 4.223-4.333% (Oct/Nov 2022 highs) reaffirms the primary uptrend. Initial support rises to 3.714-3.922% (50-day and 200-day ma).

Commodities – CRB – A breakout above the top of the 1-year downtrend channel (269), 50/200-day ma (271/270), and Jan/Apr 2023 highs confirm a reversal. Key support is 269-271 (50-day and 200-day ma). WTI Crude – Above 83.5-85 (Dec 2022 and Apr/Aug 2023 highs) reaffirm an intermediate-term trend reversal. Initial support is 75.5-76.5 (downtrend and 50/200-day ma). Gold – Recovery stalled at 2,001-2,015 (Apr 2022 Feb/Mar/Jun/Jul 2023 highs). Key initial support is 1,900.5-1,908.5 (200-day ma).

Currencies – USD – A head and shoulders top remains intact. Below 100.42-100.68 and 99.15-99.22 confirms a top. An oversold rally nears key resistance at 103.25-103.5 and 104.5-106. EURUSD – Recent rally stalled at 1.1276 or the 61.8% retracement (1.13) from the 2020-2022 decline. The correction nears key support at 1.0635-1.078 (200-day ma). USDJPY – Rally from Jul 2023 lows (137.24) nears key resistance at 145.07-145.90 (Sept 2022/Jun 2023 highs). Initial support is 142-144 and 136.5-138.

S&P 500 Sectors – RRG study shows similar sector rotations from the prior week. Consumer Discretionary (XLY) weakens in the Leading Quadrant. Technology (XLK) and Communication are correcting within the Weakening Quadrant, with XLC showing signs of bottoming. Utilities (XLU) and Consumer Staples (XLP) strengthen within the Lagging Quadrant. Real Estate (XLRE), Healthcare (XLV), Industrial (XLI), Materials (XLB), Financial (XLF), and Energy (XLE) improve within the Improving Quadrant.

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