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Technical Report for the Week of 1/18/21

Technical Summary

Equities – SPX continues with its 2-plus month uptrend channel between 3,704-3,719 and 3,843-3,858. Since the channel is 154-points, a convincing breakout above 3,858 still renders an SPX target of 4,012, near-term. However, the recent rally has created an overbought condition, opening the door for a near-term consolidation. Below trading support at 3,776.5 (1/12/20 low) has triggered a retest of the 3,704-3,719 (bottom of its channel). Violation here warns of a deeper correction toward 3,663-3,667.5 coinciding with December 2020 low and the 50-day ma, and then to 3,550 (channel breakdown target). Intermediate-term support remains at 3,300 (200-day ma).

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 and TYX continue with their bullish Aug 2020 uptrend channels between 1.67% and 2.02%, and 0.96% and 1.23%, respectively. Consolidations are possible for TYX to key initial support at 1.749-1.767% (1/6/21 breakout) and TNX to 0.957-0.986% (1/6/21 breakout).

Commodities – CRB Index is nearing crucial resistance at 176-177 or its 2018 downtrend. A breakout confirms the next rally. Initial support rises to 166.5-168, 162, and then to 154.65-155.26. WTI Crude Oil is also nearing key resistance at 58 (2018 downtrend). A breakout suggests the next rally to 63.5-66.5. Initial support rises to 46-49, 42.5-44, and 36-38.5. Gold has failed to breakout above 1,962.5-1,966.10, prompting its downtrend channel consolidation. Initial support/resistance is 1,817/1,767 and then 1,962.5-1,966, respectively.

Currencies – US Dollar (USD) achieved its recent head/shoulders top breakdown target of 89.17 (1/6/21). Although a retest of 88.15 (Feb 2018 low) is still possible, an oversold rally is nearing its key initial resistance at 91.11-91.75. EURUSD has also achieved its breakout targets of 1.235-1.2419. A rally to 1.2555 (Feb 2019 highs) is still possible. However, a near-term correction is nearing its key initial support at 1.2012-1.2059. JPYUSD failed to clear key resistance at 0.9747 (top of its channel) prompting a consolidation to key initial support at 0.957-0.962.

S&P 500 Sectors – For the past eight weeks ending on January 11, 2021, the S&P 500 RRG sector study shows the following shifts. Energy (XLE) joins Financial (XLF) in the Leading Quadrant. Communication Services (XLC) has slipped into the Weakening Quadrant joining Industrial (XLI), Consumer Discretionary (XLY), Technology (XLK), and Materials (XLB). Consumer Staples (XLP), Real Estate (XLRE), and Utilities (XLU) remain confined to the Lagging Quadrant. Healthcare (XLV) is the only S&P sector remaining within the Improving Quadrant. Since the bulk of S&P sectors are in the Weakening/Lagging Quadrants, this hint of SPX trading at an overbought level, and in need of a correction.

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