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Technical Report for the Week of 10/05/20

Equities – The SPX ended Sep 2020 at a monthly close of 3,363 or near the midpoint of its monthly range. This neither confirms nor denies a negative or positive outside month. SPX weekly chart also confirms 2 negative outside weeks on 8/31/20 and 9/14/20, respectively. Above 3,492 and above 3,5811.11 would negate these adverse technical conditions. On the daily SPX chart, a bullish gap up on 9/28/20 is technically constructive. However, SPX still needs to clear above the key initial resistance at 3,393.5-3,429 to signal the start of a recovery. The key initial support is 3,307-3,333 and 3,209.5-3,233.

Fixed Income – The 30-year US Treasury yields (TYX) and the 10-year US yields (TNX) diverged during Apr-Aug 2020 as evidenced by a higher-low pattern in TYX and a lower low pattern in TNX. However, since Sep 2020 both TNX and TYX are now showing higher-lows. Does this hint of economic recovery and the continuation of the US stock rally? TYX and TNX also confirmed positive outside months during Aug 2020 signaling the potential for major bottoms. Nonetheless, 6-month head/shoulders tops remain intact. To negate these formidable tops TYX still must clear above 1.53-1.581% and then 1.761% and TNX must surge above 0.759-0.784% and then 0.957-0.966%.

Commodities – CRB Index continues to challenge resistance at 154.87-155.69 or the 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 131.5-134. WTI Crude Oil continues to test key resistance at 43-44 corresponding to the 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 28.5-30, and then to 25-26.05. Gold continues to consolidate toward the key initial support at 1,845-1,851. Key resistance remains at 1,952-2,001.

Currencies – US Dollar (USD) has bottomed as evidenced by the recent neckline resistance report above 93.92-93.97. This suggests +2.22 points or the next USD target to 96-97. Key support remains at 93-94. EURUSD has completed a 2-mo head/shoulders top breakdown below the neckline support at 1.1696-1.1753. This warns of a -0.0316 decline or a decline to 1.14-1.15. The key resistance is 1.17-1.18 (50-day ma). JPYUSD is attempting to rebound from the key initial support at 0.9434-0.9471. Key resistance remains at 0.9563-0.9615.

S&P 500 Sectors – In the past 8 weeks ending on September 28, 2020, the S&P 500 sector rotations continue to favor the cyclical sectors as Consumer Discretionary (XLY 5.8%), Materials (XLB 3.1%), and Industrials (XLI 3.7%) all reside within the Leading Quadrant. Communication Services (XLC -1.2%) and Technology (XLK 1.3%) continue to correct within the Weakening Quadrant. Only 2 S&P sectors now reside within the Lagging Quadrant - Healthcare (XLV -1.7%) is improving while Energy (XLE -19.9%) continues to weaken further. Utilities (XLU -0.5%), Real Estate (XLRE 0.4%), Consumer Staples (XLP 1.5%), and Financial (XLF -1.6%) continue to improve within the Improving Quadrant.

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