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Technical Report for the Week of 10/09/23

Equities –SPX – Violations of 50-day ma (4,424), the bottom of the Oct 2022 uptrend channel (4,308), and Jun 2023 neckline (4,328-4,335) warn of downside risks to 4,048-4,049 (Jun 2023 h/s top breakdown target, Apr/May 2023 lows and the 50% retracement) and below 3,918 (61.8% retracement), and 3,764.5-3,809 (Dec 2022/Mar 2023 lows). The ability of SPX to maintain support at 4,181-4,208 (200-day ma) and a positive outside day (10/6/23) hints at an oversold rally to 4,328-4,335 (neckline) and above 4,376-4,401 (9/21/23 gap-down).

Fixed Income – 10-year minus 3-month yields (-0.85) have rebounded as it tests key resistance at -0.95 (2001 bottom). In four previous yield expansions, three led to recessions and SPX bear declines. 2013 scenario resulted in neither. Is this a repeat of the former or the latter? Fed Funds and 2-year yields achieved Feb 2007 highs, and 2-year nears the Jun 2006 highs, implying the Fed may have one more rate hike left. TNX – Breakout above 4.333-4.362% suggests 4.54-4.66% and 5.32-5.46%. Initial support is 4.30-4.36/4.09%.

Commodities – CRB – Jul 2023 breakout above the top of the 2022 downtrend channel (264.55) confirms an intermediate-term reversal still suggests 301.75 (8/30/23 high). Key support is 271-273.5 (8/16/23 low and the 200-day ma). WTI Crude – Breakout above 83.5-85 (Dec 2022 and Apr/Aug 2023 highs) stalled at 93.5-95.5, leading to pullback to 81.5-83.5/75-77.5. Gold – Recent sharp correction may have tested key support at 1,811-1,824.5. A positive outside day (10/7/23) hints at an oversold rally to 1,901-1,914 and 1,935-1,937.

Currencies – USD – 9/20/23 Golden cross buy led to a rally to 107.05 (10/3/23). Failure to breakout above resistance at 107.5-109 and 10/6/23 negative outside day warns of a pullback to initial support at 105.33-105.87, 104.17-104.61, and 102.86-103.275. EURUSD – A positive outside day (10/6/23) hints at an oversold rally toward 1.077-1.083 (50/200-day ma). Initial support is 1.0368-1.0448. USDJPY – Key resistance is 151.95 (Oct 2022 high). Initial support rises to 145-146.5 (Aug 2023 breakout and the 50-day ma) and 142-143 (uptrend).

S&P 500 Sectors – RRG study shows several rotations from the prior week. Financial (XLF) joins Energy (XLE) in the Leading Quadrant. Technology (XLK) and Consumer Communication Services (XLC) improved, and Consumer Discretionary (XLY) weakened in the Weakening Quadrant. Consumer Staples (XLP) and Utilities (XLU) slipped into the Lagging Quadrant. Real Estate (XLRE), Healthcare (XLV), Industrial (XLI), and Materials (XLB) remain in the Improving Quadrant, with XLV strengthening.

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