Technical Report for the Week of 10/31/22
Equities – The SPX monthly chart shows a 13-year structural uptrend channel between 2,880 and 5,224. The middle of the 13-year channel at 3,532 may be pivotal to deciding if the Jan-Oct 2022 decline of 27.54% is another cyclical bear decline within a structural bull or the next secular bear/trading range. The SPX daily chart shows SPX continuing with its 10/13/22 oversold rally. A recent breakout above the 50-day ma (3,842) can extend the rally to 4,113-4,198 (200-day ma and Jan 2022 primary downtrend. Initial support is 3,763-3,807, 3,584-3,647, and 3,491.58.
Fixed Income – The 10-year minus 3-mo yield spread contracted to 0.04 (8/1/22) and has now created another lower low at -0.17 (10/28/22), suggesting a retest of -0.20 to -0.52 (Feb 2020/Aug 2019 lows). 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 breakout above 3.248-3.483% suggests 4.25% (top of 2021 uptrend channel) and then 4.4-4.5% (breakout target). Initial support is 3.48-3.62/ 3.25/2.52-2.83%.
Commodities – CRB’s violation of the 50/200-day ma (280.5/288) and a death cross-sell signal warns of a deep correction to 241-245. Key initial resistance is 280.5-282 and 286-289. WTI Crude found pivotal support 76.25 (9/26/22), prompting a recovery toward key initial resistance at 96.5-97.5 (200-day ma) and above this 102-105. Gold rebounded from 1,622.2- (9/29/22) via a positive outside day. Another positive outside day on 10/21/22 hints at a recovery to key initial resistance at 1,687-1,739, 1,785-1,824.5.
Currencies – US Dollar can rally to 118.59-121.21 (Oct 2000, Jul 2001, and Jun 2002 highs). An inside month (Oct 2022) and three negative outside days (9/28, 10/13, and 10/21) suggest pullback to support at 109-110. EURUSD –Support is 0.9330 (May 2002 breakout). A potential inside month and 3 positive outside days hint at an oversold rally to resistance at 0.9952-1.00, 1.0198, and 1.035-1.0368. USDJPY’s 20 and 30-year breakouts can still lead to a 152-153 / 160.35. A negative outside day (10/21/22) warns of consolidation to 144-146/140-142.
S&P 500 Sectors – RRG study shows sector improvements. Healthcare (XLV), Financial (XLF), Industrials (XLI), and Energy (XLE) remain in the Leading Quadrant, with XLE, XLV, and XLF strengthening. Materials (XLB) improve in the Improving Quadrant. Consumer Discretionary (XLY) joins Consumer Staples (XLP) and Utilities (XLU)in the Weakening Quadrant, with XLP strengthening. Communication Services (XLC), Technology (XLK), and Real Estate (XLRE) remain in the Lagging Quadrant.
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