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Technical Report for the Week of 10/17/2022

Equities – SPX Index – Jan 2022 primary downtrend and two head and shoulders top patterns breakdowns warn of further selling. The 1-plus year h/s top neckline breakdown at 4,116.5 (May 2022) suggests 3,410.5 or near the 50% retracement (3,505) from Mar 2020-Jan 2022 rally and the Aug 2020 V-pattern breakout (3,393.5). An oversold condition and 10/13/22 positive outside day hint at a technical rally to initial resistance at 3,707-3,749.5 (9/23 and 10/7/22 gap-downs) and 3,807-3,863 (Aug 2022 downtrend and the 38.2% retracement from Aug-Oct 2022 decline).

Fixed Income – The 10-year minus 3-mo yield spread contracted to 0.04 (8/1/22) before rebounding. A higher low (0.04 – Aug 2022 and 0.12 – Sept 2022) hints at a potential bottom. A violation of 0.04 warns of a decline from -0.20 to -0.52. The 10-year minus 2-year spread inverted in Apr 2022 (-0.06). A second and third lower-low in Aug 2022 (-0.48), and Sept 2022 (-0.51) warn of a deeper recession. TNX’s move above 3.248-3.483% confirms a structural breakout and suggests 4.25% and 4.4-4.5%. Initial support is 3.25-3.48 and 2.52-2.71%.

Commodities – CRB’s violation of the 50/200-day ma (284.5/286.5) and a death cross-sell signal warns of a deeper correction to 241-245. Key initial resistance is 283.5-287.5 and 292-295. WTI Crude violated pivotal support at 85-88.5, prompting a decline to 75-77.5. Finding support at 76.25 signals a rally to initial resistance at 93.5-97.5 and 101.5-102. Gold broke pivotal support at 1,672-1,678, prompting a decline to 1,622-1,627.5 (50% retracement from the 2018-2020 rally and Sept 2022 low). Resistance is 1,714-1,739, 1,780-1,785, and 1,804-1,824.5.

Currencies – US Dollar can rally to 118.59-121.21 (Oct 2000, Jul 2001, and Jun 2002 highs). Two negative outside days (9/28 and 10/13/22) warn of consolidation to initial support at 109.70-110.79. EURUSD continues with its primary downtrend. The next support is 0.9330 (May 2002 breakout). An oversold rally can lead to initial resistance at 0.9952-1.00, 1.0198, and 1.035-1.0368. USDJPY’s 20 and 30-year breakouts in 2022 suggest 151.77-152.62 and 160.35. Initial support rises to 145-146 and 140.35-141.

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

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