Technical Report for the Week of 09/26/22

Technical Summary

Equities – SPX nears pivotal support at 3,636.87-3,721.56, corresponding to the June and July 2022 lows. Violation of neckline support warns of the next SPX selloff to the mid-3,000s (3,393.5-3,505) and below this low-3,000s (3,195-3,233), high-2,000s (2,743.2,948.5), and low-2,000s (2,192-2,346.5). Initial resistance falls to 3,727-3,749.5 (9/23/22 gap-down), 3,907-3,946 (9/21/22 negative outside day high and 6/28/22 negative outside day high), and 3,972-4,008 (extension of Jun 2022 uptrend breakdown and Aug 2022 downtrend).

Fixed Income – The 10-year minus 3-mo yield spread contracted to 0.04 (8/1/22) before rebounding. Is this a bottom? A higher low (0.4/0.12) hints at oversold rallies. The 10-year minus 2-year spread inverted in Apr 2022 (-0.06). A second lower low in Aug 2022 (-0.48) and now a third lower low in Sept 2022 (-0.51) warns of a deeper recession. TNX nears structural resistance at 3.0-3.5%. A convincing breakout confirms significantly higher rates possibly to 6.297%. Key initial support rises to 3.483%, 3.055%, and 2.525-2.536%.

Commodities – CRB Index broke a key support at 273-276.5 (Jul/Sept 2022 lows), prompting a correction to 241-245. Initial resistance is 273-276.5/283-287.5. WTI Crude violated 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 to 75-77.5. Initial resistance is 85-86, 91-93, and 95-97.5. Gold breaks pivotal support at 1,672-1,678 (Jun 2020, 2021, and Jul 2022 lows). The next support is 1,627.5. Initial resistance is 1,742-1,753 and 1,779-1,785.

Currencies – US Dollar surpassed several resistances in the past week. Intermediate-term resistance is 118.59-121.21 (Oct 2000, Jul 2001, and Jun 2002 highs). Initial support is 109.14-110.79 and 107-108. The EURUSD oversold rally faded at 1.02-1.0368, prompting the resumption of the structural bear. The next support is 0.9592/0.9330 (Jun/May 2002 breakouts). JPYUSD nears key support at 0.6784-0.6819 (Jun/Aug 2008 lows). Initial resistance is 0.7175-0.724 (Jul 2022 low and 50-day ma) and 0.7613-0.7668).

S&P 500 Sectors – RRG study shows similar rotations from last week. Consumer Discretionary (XLY), Industrials (XLI), and Technology (XLK) remain in the Leading Quadrant, with XLI strengthening and XLK and XLY weakening. Financial (XLF) continues to improve in the Improving Quadrant. Communication Services (XLC), Real Estate (XLRE), and Materials (XLB) remain in the Lagging Quadrant, with XLB improving and XLC and XLRE weakening. Consumer Staples (XLP), Healthcare (XLV), Utilities (XLU), and Energy (XLE) remain in the Weakening Quadrant, with XLE and XLU improving.

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