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Technical Report for the Week of 08/28/23

Technical Summary

Equities –SPX – The primary uptrend (4,197) from the mid-October 2022 low (3,491.58 - 10/13/22) remains intact. However, a violation of the Mar 2023 uptrend channel (4,509), three negative outside days (7/27, 8/10, and 8/24/23), gap-down (8/2/23), and 3-mo head/shoulders top warn of further near-term weakness. Neckline support is 4,328-4,335 (6/26 and 8/18 lows). A breakdown warns of a decline to pivotal support at 4,104-4,195 and 4,049. Initial resistance is 4,448.5-4,459.5 (50-day ma and the left and right shoulders) and 4,509 (Mar uptrend extension).

Fixed Income – TNX minus 3-month Treasury yield – Spread nears key resistance at -1.23 or the 200-day ma. Initial support rises to -1.52 to -1.55 (50-day ma), -1.78 to -1.74 and -1.89. Fed Funds and 2-year US Treasury yield near the Feb 2007/Jun 2006 highs, suggesting the Fed is close to the end of its tightening cycle. TNX – Rally to 4.362% surpassed 4.333% (Oct 2022 high). However, a gap-down and bearish island reversal (8/23/23) warns of consolidation to key support at 3.718-3.971% (50-day and 200-day ma).

Commodities – CRB – A breakout above the top of the 1-year downtrend channel (269), 50/200-day ma (272/270), and Jan/Apr 2023 highs confirm a reversal. Key support is 270-272 (50/200-da ma). WTI Crude – Above 83.5-85 (Dec 2022 and Apr/Aug 2023 highs) reaffirm an intermediate-term trend reversal. Initial support is 75-76.5 (downtrend and the 50-day and 200-day ma). Gold – Recent rally nears resistance at 1,949.5-1,951 (50-day ma) and 2,001-2,011. Initial support is 1,900.5-1,915.5 (Jun/Aug 2023 lows and the 200-day ma).

Currencies – USD – A head and shoulders top remain. Another rally nears key resistance at 104.5-106 (2023 highs and right shoulders). Initial support is 102-103 (50-day/200-day ma). EURUSD – A recent rally stalled at 1.1276 near the 61.8% retracement (1.13) from the 2020-2022 decline. The correction nears key support at 1.0635-1.08 (200-day ma/uptrend). USDJPY – Rally from Jul 2023 lows (137.24) near key resistance at 145.07-145.90 (Sept 2022/Jun 2023 highs). Initial support is 143-144 and 137-138.

S&P 500 Sectors – RRG study shows similar rotations from the prior week. Consumer Discretionary (XLY) weakens from Leading and nears the Weakening Quadrant. Technology (XLK) weakens and Communication (XLC) bottoms in the Weakening Quadrant. Utilities (XLU) and Consumer Staples (XLP) near the Improving Quadrant from 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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