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Technical Report for the Week of 08/23/21

Technical Summary


Equities – SPX may have successfully rebounded from its 50-day ma (4,354) on the recent 3-day pullback to 4,367.68 (8/19/21 low). If confirmed, this will be the sixth higher-low pattern this year. Next resistance is 4,480.26 (8/16/21 all-time high) and 4,585-4,595 (top of Apr 2020 uptrend channel and the V-breakout target. Key initial support is 4,372.5-4,394, coinciding with the 7/23/21 breakout, 7/23 and 8/3/21 lows, and the bottom of the May 2021 uptrend channel. Violation here warns of the next correction to 4,233-4,257 and 4,164-4,168, and then 4,057-4,061.


Fixed Income – The 10-year minus 3-mo US yield spread continues to test support at 1.14-1.27 (prior breakout and 200-day ma), signaling an inflection point. The US yield curve has contracted since Mar 2021. Is this contraction temporary or sustainable? TNX may have found key support at 1.129-1.135% or the 50% retracement (1.135%) from Aug 2020-Mar 2021 rally and Jul/Aug 2021 lows (1.128-1.129%). Key initial resistance remains at 1.316-1.347% (50-day/200-day ma) and 1.379-1.471% (8/12/21 highs and Jul breakdown).


Commodities – CRB Index is nearing an inflection at 215-220. Above 220 confirms rising long-term inflation. Failure to breakout signals a return to nominal inflation as CRB settles into a trading range between 157-161 and 215-220. WTI Crude Oil failed to clear above structural resistance at 74-77 (2008 downtrend and Jul/Oct 2018 highs) as it retests key support at 60-61 (200-day/10-mo ma and the 38.2% retracement from 11/20-6/21 rally). Gold is encountering key resistance at 1,797-1,814.5 (50/200-day ma), and above this to 1,919-1,966 (Nov 2020 and Jan/Jun 2021 highs). Key support is 1,673-1,677 (2021 lows).


Currencies – US Dollar is currently breaking out above the top of its triangle at 93.21-93.47. The breakout confirms the next USD rally to 94.61-94.82 and 96.02-96.57. Initial rises to 91.37-92.35 (50-day/200-day ma) and 89.17-89.51. EURUSD is nearing a pivotal breakdown on a convincing breach of 1.1605-1.1706, confirming a major top. Key resistance is 1.184-1.20 (50-day and 200-day ma). JPYUSD continues to show signs of a near-term bottom. Key resistance is 0.9197-0.9312 0.9304-0.932 (200-day ma). Key support is 0.8956-0.9012 and 0.8899-0.8916.


S&P 500 Sectors – RRG sector studies show a few changes among the S&P sectors from the prior week. Technology (XLK) and Healthcare (XLV) continue to strengthen within the Leading Quadrant. Communication Services (XLC) and Real Estate (XLRE) continue to trend lower in the Weakening Quadrant, suggesting corrections. Consumer Staples (XLP), Financials (XLF), Energy (XLE), Industrials (XLI), and Materials (XLB) remain in the Lagging Quadrant. Utilities (XLU) joins Consumer Discretionary (XLY) in the Improving Quadrant. The above rotations suggest continued narrowed market breadth as investors are sector-selective heading into the seasonality weakness period.


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