Updated: Aug 31
Equities – SPX monthly chart shows a well-defined 11-year uptrend channel between 3,130-3,343 and 4,532. A breakout above 4,532 confirms the next SPX rally to 4,595 (V-pattern breakout target) and then to 5,934 (accelerated channel breakout target). However, failure to clear convincingly above 4,532-4,595 warns of the next SPX pullback. Key initial support is 4,378-4,399 (50-day and 10-wk ma), and below this to 4,040-4,177 (200-day and 30-wk ma. Additional longer-term support is 3,849-3,964 (extension of the top of broadening pattern) and then 3,393.5-3,588.
Fixed Income – The 10-year minus 3-mo US yield spread is testing key support at 1.09-1.16 (prior breakout and Jul/Aug lows), signaling an inflection. The US yield curve began to contract in Mar 2021. Is this temporary or the start of a deeper contraction? TNX may have found support at 1.129-1.135% or the 50% retracement from the Aug 2020-Mar 2021 rally and the Jul/Aug 2021 lows. 50-day/200-day (1.327%) have converged, signaling an inflection. Initial resistance is 1.38-1.42% (7/13 and 8/12/21 highs), 1.47-1.57%, and then 1.70-1.765%.
Commodities – CRB Index is nearing an inflection at 215-220. A breakout confirms inflation. Failure to breakout signals a return to nominal inflation between 157-161 and 215-220? WTI Crude Oil failed near structural resistance at 74-77 (2008 downtrend and Jul/Oct 2018 highs). Key support is 60-61 (200-day/10-mo ma and the 38.2% retracement from 11/20-6/21 rally). Gold is nearing key resistance at 1,793-1,819.5/1,837.5 (50/200-day ma/Jul 2021 highs). The breakout suggests the next rally to 1,919-1,966. Initial support is 1,750-1,755/1,668-1,676.
Currencies – US Dollar continues to bottom via two higher-low patterns. A breakout above 93.21-93.47 renders the next rally to 94.61-94.82 and 96.02-96.57. Key initial support is 92.55/91.38 (50/200-day ma) and 89.17-89.51. EURUSD may have broken pivotal support below 1.1605-1.1706, confirming a major top. Key resistance remains at 1.182-1.20 (50-day ma and 200-day ma). JPYUSD continues to develop a near-term bottom. Key resistance is 0.9197-0.9304 (Apr/Aug 2021 highs and 200-day ma). Key support is 0.8956-0.9012 and 0.8899-0.8916.
S&P 500 Sectors – RRG sector studies show similar trends from the prior week. Technology (XLK) and Healthcare (XLV) remain in the Leading Quadrant. Communication Services (XLC) and Real Estate (XLRE) continue to correct in the Weakening Quadrant. Consumer Staples (XLP), Financials (XLF), Energy (XLE), Industrials (XLI), and Materials (XLB) remain in the Lagging Quadrant. However, XLF, XLB and XLI may be bottoming. Utilities (XLU) and Consumer Discretionary (XLY) continue to improve within the Improving Quadrant. The above rotations suggest investors remain selective, favoring a rotation to defensive sectors (XLV and XLU) and growth/cyclical sectors (XLK and XLY).
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