Updated: Aug 24, 2020
Equities – SPX monthly chart suggests the 2009 uptrend channel between 2,526-2,738 and 2,639-3,755 remains intact. Does this then imply SPX can challenge the top of the channel before the next major correction/bear? Is this a U, V, W, L, or K recovery? It appears that based on the weekly SPX chart a convincing surge above 3,393.52 confirms a V-type breakout. On the daily SPX chart, the 7/8/20 ascending triangle breakout above 3,233-3,235 suggests an SPX target to 3,501-3,529, near-term. Key support is at 3,221-3,235 or the Jul 2020 breakout and the 50-day ma.
Fixed Income – The 30-year US Treasury yields (TYX) and the 10-year US yields (TNX) continue to diverge as evidenced by a higher-low pattern in TYX and a lower low pattern in TNX. Since TYX is more sensitive to economic conditions does this imply a sustainable business recovery and continued stock market rally? TNX and TYX continue with their 4-plus month head/shoulders tops. Recently, failed rallies to 1.446% (TYX) and 0.727% (TNX) on 8/13/20 reinforced right shoulders. Key neckline supports are 1.1260-1.165% (TYX) and 0.543-0.504% (TNX).
Commodities – CRB Index is encountering major resistance at 152.5-155 or the 61.8% retracement from the Jan-Apr 2020 decline and the 200-day ma. Key initial support rises to 139.5-142.5. WTI Crude Oil continues to challenge major resistance at 42-43.5 (Mar 2020 neckline breakdown, 61.8% retracement from the Jan-Apr 2020 decline, and the 200-day ma). The key initial support is 40.5-40.75 (50-day/10-wk ma) and then 38.5-34.75. Gold’s breakout above 1,923.70 still renders a target to 2,723, intermediate-term. Key initial support rises to 1,870-1,924 (50-day ma and recent 8/12/20 low), and then 1,776-1,844.
Currencies – USD has fallen sharply to a low of 92.14 (8/21/20). A positive outside day on 8/21/20 hints of a near-term USD bottom and a rally to initial resistance at 93.92-93.97, and above this to 94.61-95.22. EURUSD has stalled near the key resistance at 1.20. A negative outside day (8/21/20) warns of consolidation to initial support at 1.1697-1.711/1.16. JPYUSD rally has stalled at 0.9563-0.9599 as negative outside days (7/13/20 and 8/19/20) warn of consolidation to key initial support at 0.938-0.9392 and 0.9246-0.926.
S&P 500 Sectors – In the past 8 weeks ending on Aug 17, 2020, the S&P sector rotations continue to favor the cyclical sectors as evidenced by technical strength from the Consumer Discretionary (XLY 18.0%) and the Materials (XLB 13.6%) as both remain confined to the Leading Quadrant. However, Communication Services (XLC 15.8%) and Technology (XLK 16.2%) have slipped into the Weakening Quadrant suggesting near-term consolidations of these two secular leaders. Healthcare (XLV 9.5%), Consumer Staples (XLP 12.6%), Utilities (XLU 7.7%), and Real Estate (XLRE 6.4%) continue to rise within the Lagging Quadrant. Financial (XLF 7.7%), Industrials (XLI 15.6%, and Energy (XLE -1.3%) remain within the Improving Quadrant. However, XLE may decline to the Lagging Quadrant due to weakening relative strength and relative momentum.
To view the entire report go to the Reports tab on the website or click the following: