Technical Report for the Week of 11/02/20

Technical Summary

Equities – An outside month (Sep 2020) and an inside month (Oct 2020) signals an indecisive market. The high and low for Sep 2020 (3,209 and 3,588) represent key support. Under strong selling, the 10-mo and 30-mo ma (3,122.5/2,050.5) can act as major support. A major battle between the bulls and the bears has developed as evidenced by a bearish 2-year broadening top, and a bullish V-breakout. SPX is nearing its key initial support at 3,209.5-3,233 (7/20 breakout and the 9/24/20 low). Initial resistance is 3,342.5-3,402.5, and above this to 3,350-3,588.

Fixed Income – The 30-year US yields (TYX) and the 10-year US yields (TNX) diverged during Apr-Aug 2020 as a higher-low occurred in TYX and a lower-low developed in TNX. Since Sep 2020, a series of the higher-lows hint of a turnaround. A higher-high in TYX and TNX above 1.67% and 0.904% would reaffirm higher US interest rates. TYX and TNX confirmed positive outside months (Aug 2020), suggesting pivotal bottoms. However, to confirm reversals, TYX and TNX must surpass key resistances at 1.761% and 0.957%, respectively.

Commodities – CRB Index continues to struggle to clear above the key resistance at 154.65-155.69. The key initial support is 142.59-142.70, and below this to 139.56 (50-day ma). WTI Crude Oil has also failed to clear above formidable key resistance at 43-45, prompting another correction to the key initial support at 34.36-36.13, and below this to 28.5-29.5, and then 26.05. Gold continues to consolidate its gains over the past few months trading within a trading range between 1,845-1,851 (initial support) and 1,922-1,939.5 (initial resistance).

Currencies – US Dollar (USD) is mixed, as evidenced by a bullish positive outside month (Sep 2020) and a neutral inside month (Oct 2020). A 3-mo head and shoulders top/diamond pattern also warns of further volatility. The key initial support is 91.75-92.46, and the key initial resistance is 93.97-94.14/94.79. EURUSD has generated a bearish negative outside month (Sep 2020) and a neutral inside month (Oct 2020). The key support is 1.1613, and key resistance is 1.179 (50-day ma), 1,1881-1.1917, 1.1966, and then 1.2012. JPYUSD has stalled at 0.9599-0.9613. Initial support is at 0.9519-0.9529 and then 0.948

S&P 500 Sectors – In the past eight weeks ending on October 26, 2020, the S&P 500 sector rotations have favored defensive sectors. Another cyclical sector, Consumer Discretionary (XLY -4.0%), has joined Technology (XLK -5.9%) and Communication Services (XLC -4.0%) in the Weakening Quadrant. Materials (XLB -1.5%) and Industrials (XLI -2.2%) retain their leadership roles within the Leading Quadrant. The two S&P sectors residing within the Lagging Quadrant are Healthcare (XLV -3.4%), which continues to improve, and Energy (XLE -16.3%), which continues to weaken. Recent market uncertainties have led to defensive sectors such as Utilities (XLU 6.0%), Real Estate (XLRE -5.2%), Consumer Staples (XLP -4.4%), and Financial (XLF 0.1%) improving within the Improving Quadrant.

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