Technical Summary
Equities – The recent 74.59% rally from the Mar 2020 bottom remains one the fastest and strongest bull rallies. The question is – how high is high for SPX? Three technical SPX targets: (1) Triangle breakout suggests +378.77 or 3,928.5-3,967 (near-term). (2) 161.8% Fibonacci projection renders a target to 4,136 (intermediate-term). (3) The V-pattern breakout suggests a target of 4,595 (longer-term). SPX is nearing overbought conditions. Initial support rises to 3,739 (top of broadening pattern), and below this to 3,550-3,619 (triangle breakout and the 50-day ma), 3,476 (extension of the top of triangle), 3,393.5 (V-pattern breakout), and 3,269-3,317 (200-day ma, the bottom of the triangle, and May 2019 uptrend).
Fixed Income – The 30-year US yields (TYX) and the 10-year US yields (TNX) temporarily diverged during Apr-Aug 2020 via higher-low in TYX and lower-low in TNX. Since Sep 2020, a series of higher-lows and higher-highs reaffirms the return to a direct TYX and TNX relationship. TYX is nearing key resistance along 1.94-1.955%. A breakout suggests the next rally to 2.335-2.45%. Initial support 1.749-1.767%. TNX is also nearing key resistance at 1.173-1.184%. A breakout suggests the next rally to 1.266% and 1.354-1.445%. Initial support is 0.957-0.986%.
Commodities – CRB Index has broken out above key resistance at 166.5-168, signaling the next rally to 177 (2018 downtrend). Initial support rises to 166.5-168, and below this to 159.5-161.5, and then 154.65-155. WTI Crude Oil has broken out above key resistance at 42-44. The breakout suggests a rally to 63.5-66.6. Initial support is 46-49, and below this to 42.5-44 (50-day ma), and 36-37.5 (200-day ma). Gold has failed to breakout above 1,962.5-1,966.10, prompting a consolidation to 1,820-1,870 (200-day ma and the 12/14/20 low).
Currencies – US Dollar (USD) traded to a low of 89.17 (1/6/21). Although a retest of 88.15 (Feb 2018 low) is possible, an oversold rally has developed. Initial resistance is 91.5-91.75, and below this to 93.5-94.75, and then 95-95.5. EURUSD has recently rallied to 1.2349 (1/6/21). Although a rally to 1.2555 (Feb 2018 high) is possible, an overbought condition warns of consolidation to initial support at 1.2012-1.2059 and then 1.192. JPYUSD has failed to clear key resistance at 0.9747 (top of its channel), signaling a consolidation to key initial support at 0.961-0.9625.
S&P 500 Sectors – In the past eight weeks ending on January 4, 2021, the S&P 500 RRG sector study show rotations favoring the Financial (XLF) and Communication Services (XLC) as evidenced by their positioning within the Leading Quadrant. The Industrial (XLI) has joined Consumer Discretionary (XLY), Technology (XLK), and Materials (XLB) in the Weakening Quadrant. However, these are corrections within bull trends. The defensive related sectors such as Consumer Staples (XLP), Real Estate (XLRE), and Utilities (XLU) continues to decline within the Lagging Quadrant. Healthcare (XLV) and Energy (XLE) remain within the Improving Quadrant.
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