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Technical Report for the Week of 08/24/20

Updated: Aug 24, 2020

Technical Summary

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.

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