Technical Report for the Week of 1/25/21
Equities – SPX continues with its 2-plus month uptrend channel between 3,728-3,735 and 3,869-3,881. Since the channel is 141-points, a breakout above 3,869 renders the next SPX rally to 3,928-3,967 (triangle breakout target), and then to 4,034 (2-plus month channel breakout target). An overbought condition has developed into the recent rally. Initial trading support rises to 3,804.5-3,816 (1/20/21 gap-up), and below this to 3,749.62 (1/15/21 low), and then to 3,728-3,735 (bottom of its channel). Violation here warns of a correction to 3,663-3,694 (Dec 2020 low and the 50-day ma), and below this to 3,587 (downside channel breakdown target). Intermediate-term support remains at 3,325 (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 Aug 2020 uptrend channels between 1.66% and 2.03%, and 0.967% and 1.233%, respectively. The recent rallies suggest near-term consolidations are possible. TYX can retest its initial support at 1.75-1.77% (1/6/21 breakout) and TNX to 0.957-0.986% (1/6/21 breakout and the crucial 50-day ma).
Commodities – CRB Index has failed to clear pivotal resistance at 176-177 or its pivotal 2018 downtrend. A breakout confirms the next sustainable intermediate-term rally. Initial support rises to 166.5-168 and then to 164 (50-day ma). WTI Crude Oil is nearing key resistance at 54 (late-Nov 2020 breakout target) and then 58-59 (2018 downtrend). Initial support rises to 46-49 and then 43-44. Gold has failed to breakout above key resistance at 1,966.10, prompting a consolidation. Key initial support and resistance is 1,800-1,817/1,767 and 1,962.5-1,966, respectively.
Currencies – US Dollar (USD) achieved its downside target of 89.17 (1/6/21) but has also faded near key initial resistance at 91-91.75. A trading range is now likely between 89.17 and 91-91.75. EURUSD has also achieved its breakout targets of 1.235-1.2419. Although a rally to 1.2555 (Feb 2019 highs) is still possible, medium-term a short-term correction is now likely between 1.2012-1.209 and 1.2349-1.2419. JPYUSD failed at key resistance near 0.9747 (top of its uptrend channel). This suggests a consolidation to 0.9575-0.962.
S&P 500 Sectors – In the past eight weeks ending on January 19, 2021, the S&P 500 RRG sector study shows little change from the prior week. Energy (XLE) and Financial (XLF) remain in the Leading Quadrant. Communication Services (XLC), Industrial (XLI), Consumer Discretionary (XLY), Technology (XLK), and Materials (XLB) reside in the Weakening Quadrant. However, XLK and XLC are beginning to turn, suggesting their recent corrections may be nearing an end. Consumer Staples (XLP), Real Estate (XLRE), and Utilities (XLU) are confined to the Lagging Quadrant. Healthcare (XLV) is still the only S&P sector in the Improving Quadrant, but the price momentum is weakening.
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