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Technical Report for the Week of 10/25/21

Equities – The four gap-ups and a convincing move above the 9/2 and 10/22/21 all-time highs of 4,546-4,560 confirm the 10/4/21 bottom (4,278.94), and most importantly, negates a bearish head and shoulders top. An overbought condition has developed into the recent recovery. A consolidation to key support at 4,445.5-4,496 solidifies the handle of a bullish cup and handle pattern. It also alleviates an overbought condition, setting into motion an SPX breakout above 4,546-4,560. The breakout suggests the next target to 4,595, 4,813-4,840, and 4,858.5-4,886.

Fixed Income – The 10-year minus 3-mo US yield spread continues to steepen. The next resistance is 1.73 (Mar 2021 highs). US treasury yields continue to trend higher after breaking out of their previous sideways trading trends. The rise in yields across the yield curve suggests the market is pricing in a Fed taper in Nov 2021. TNX has recently broken out above resistance at 1.54-1.57% (Mar 2021 downtrend and Sep 2021 highs), signaling a retest of 1.70-1.765% (Mar/May 2021 highs). Key initial support is 1.41-1.43 (50/200-day ma).

Commodities – CRB's recent breakout is inflationary. The next resistance is 267-268 (61.8% retracement and the late-2014 breakdown). Initial support is 225-226 (50-day/10-wk ma) and 218-221.25 (9/15/21 breakout and 9/21/2 low). WTI Crude Oil has broken out above pivotal resistance at 75-77, signaling the next WTI rally to the mid-80s/low-90s. Key support rises to 75-77 and 73-73.5. Gold continues to consolidate within a trading range between 1,673-1,677 (Mar/Aug 2021 lows) and 1,837-1,837.5 (7/29 and 9/3/21 highs).

Currencies – US Dollar is consolidating near prior Sep 2021 breakout and 50-day ma at 93.30-93.47. The key resistance remains at 94.52-94.82 (Sep 2020/Sep Oct 2021 highs and 38.2% retracement). EURUSD has rebounded from the next key support at 1.1493-1.1524. However, there remains formidable resistance at 1.1664-1.171 (50-day ma and Sep 2021 breakdown). JPYUSD tested critical support at 0.8719-0.8930 (Nov 2017 and Oct 2018 bottoms). A deeply oversold condition hints of a bounce to 0.8839 and above this 0.8899-0.8956.

S&P 500 Sectors – The RRG sector study shows numerous sector rotations. The rotations continue to favor value and cyclical sectors. Financial (XLF) is the sole sector in the Leading Quadrant. Technology (XLK) joins Real Estate (XLRE) and Healthcare (XLV) in the Weakening Quadrant, signaling corrections. Communication Services (XLC) and Utilities (XLU) join Industrials (XLI) and Materials (XLB) in the Lagging Quadrant. Consumer Staples (XLP) joins Energy (XLE) and Consumer Discretionary (XLY) in the Improving Quadrant.

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