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Technical Report for the Week of 09/19/22

Technical Summary

Equities –SPX stalled at 4,325 (8/16/22), failing to clear pivotal resistance at 4,258-4,367 (top of the Jan 2022 downtrend, 200-day ma, and the 61.8% retracement from Jan-Jun 2022 decline). The 8/22/22 gap-down, 8/26/22 negative outside day, 9/13/22 gap-down and island reversal, violation of 50-day ma, Jun 2022 uptrend breakdown, and the 4-month head and shoulders top warn of further selling. Key support is 3,636.87 (6/17/22 low and neckline). Key resistance is 4,119-4,178 (left and right shoulders).

Fixed Income – The 10-year minus 3-mo yield spread contracted to 0.04 (8/1/22). Is this a temporary bottom or will it retest the Feb 2020/Aug 2019 lows (-0.20/-0.52)? The 10-year minus 2-year spread inverted in Apr 2022 (-0.06) and a second inversion occurred in Aug 2022 (-0.48). Is the bond market discounting a mild economic recession but not a deeper recession? TNX nears structural resistance at 3.0-3.5%. A breakout warns of significantly higher rates. Key initial resistance/support is 3.483% (Jun 2022 high) and 2.994% (50-day ma).

Commodities – Commodities (CRB) nears an inflection as it tests key support at 273-276.5 (Jul/Sept 2022 lows). Initial resistance is 286.5-288, 292-295, 302, and 314-316. WTI Crude breaks pivotal support at 85-88.5 (1/18/22 breakout, Feb/Aug 2022 lows, and the 61.8% retracement). Below 81.20 (Sept 2022 lows) reaffirms the breakdown. Initial resistance is 90-93 (50-day ma) and 96-97.5 (200-day ma). Gold nears pivotal support at 1,672-1,678 (Jun 2020, 2021, and Jul 2022 lows). Key initial resistance is 1,747-1,753/1,779-1,785.

Currencies – US Dollar nears next resistance at 110.79 (9/7/22 high) and above this 112.5 (top of Jan 2022 channel). Initial support is 109.14 (8/23/22 breakout) and 107.48-107.67 (50-day ma and 8/26 and 9/16 lows). EURUSD oversold rally faded at 1.02-1.0368 (50-day ma, May/Jun lows, and Jan and Feb 2022 downtrend). Initial support is 0.9864-0.9952 (Jul, Aug, and Sept lows). JPYUSD’s breakdown below 0.740 (2002 low) warns of 0.6784-0.6819. Initial resistance is 0.7175-0.727 (Jul 2022 low and 50-day ma) and 0.7613-0.7668).

S&P 500 Sectors – RRG study shows key sector rotations. Consumer Discretionary (XLY) and Industrials (XLI) join Technology (XLK) in the Leading Quadrant. Financial (XLF) strengthens in the Improving Quadrant. Communication Services (XLC) joins Real Estate (XLRE) and Materials (XLB) in the Lagging Quadrant. XLB shows improving relative momentum. Consumer Staples (XLP), Healthcare (XLV), Utilities (XLU), and Energy (XLE) remain in the Weakening Quadrant. XLE and XLU relative price momentum improves.

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