Technical Report For the Week of 09/28/20
Equities – SPX has peaked at 3,588.11 as the negative outside days (9/10/20, 9/16/20, and 9/23/20), gap down (9/17/20), and the 2-month head/shoulders top pattern warn of a near-term top. Violation of neckline at 3,310.5-3,326 signals a decline to 3,209.53,233 (9/23/20 low, 6/8/20 high, and the 7/20/20 breakout), and below this to 3,055-3,107 (200-day ma and 38.2% retracement from Mar-Sep 2020 rally), and then to 2,890-2,966 (50% retracement, Apr 2020 high, and Jun 2020 low). Under strong selling, SPX can decline to the 61.8% retracements at 2,725. Key initial resistance is 3,351-3,393.52 (50-day ma and Jun 2020 V-breakout), 3,425.5-3,429 (9/10 and 9/16/20 highs), and then 3,588.11 (9/2/20 all-time high).
Fixed Income – TYX and TNX confirmed positive outside months (Aug 2020). This hints of the potential for major bottoms in U.S. interest rates. However, the 6-month head/shoulders tops remain intact. To negate the distribution tops TYX must clear above 1.53-1.581% (left/right shoulders) and 1.761% (head) and TNX must also breakout above 0.759-0.784% (left/right shoulders) and 0.957-0.966% (head).
Commodities – CRB Index continues to challenge resistance at 154.87-155.69 (61.8% retracement from the Jan-Apr 2020 decline and 3/20/20 gap-down). Key initial support is 144.59, 139.5-140, and 131.5-133.5. WTI Crude Oil is also testing key resistance at 43-44 (Mar 2020 neckline breakdown and the 61.8% retracement from the Jan-Apr 2020 decline). Key initial support rises to 34.5-36, and below this to 28.5-31, and 25-26.05. Gold continues to consolidate and is nearing key initial support at 1,845-1,851, and below this to 1,770-1,789.
Currencies – US Dollar (USD) has broken out above key neckline resistance at 93.92-93.97 completing a 2-mo head/shoulders bottom pattern. This suggests +2.22 points or the next USD target toward 96-97. The key support rises to 93.5-94 and then to 92-92.5. EURUSD has completed a 2-mo head/shoulders top breakdown below the neckline at 1.1696-1.1753. This warns of a -0.0316 decline toward 1.14-1.15. The key initial resistance is at 1.17-1.18 or the 50-day ma. JPYUSD continues to consolidate toward key initial support at 0.9434-0.9471, and below this to 0.9246-0.929. The key resistance is at 0.9599-0.9615.
S&P 500 Sectors – In the past 8 weeks ending on September 21, 2020, despite the broad market correction sector rotations continue to favor the cyclical sectors as evidenced by Consumer Discretionary (XLY 5.3%), Materials (XLB 4.0%), and now Industrials (XLI 7.1%) residing within the Leading Quadrant. Communication Services (XLC 0.9%) and Technology (XLK 3.4%) continue with their corrections as they slip further into the Weakening Quadrant. Healthcare (XLV -2.0%), Utilities (XLU -2.6%), and Real Estate (XLRE -3.8%) continue to improve within the Lagging Quadrant. Note that XLU is close to moving into the Improving Quadrant. Energy (XLE -14.9%) continues to struggle within the Lagging Quadrant. Consumer Staples (XLP 1.1%) and Financials (XLF 1.7%) continue to rise within the Improving Quadrant.
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