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Technical Report for the Week of 11/09/20

Equities – An outside month (Sep 2020), inside month (Oct 2020), and the potential for another inside month (Nov 2020) signals an indecisive market where the buyers and sellers are deadlocked. The high and low for Sep 2020 at 3,209 and 3,588, respectively become increasingly important SPX levels that can help to break the deadlock. Two conflicting patterns – a bullish V-breakout and a bearish2-year broadening top have also developed on the weekly suggesting a major intermediate-term battle between the bulls and the bears. On the daily chart, SPX has now transitioned to either a double bottom (W) or a triple top (M). Above 3,550-3,588 confirms a breakout and below 3,200-3,234 confirms breakdown.

Fixed Income – The 30-year US yields (TYX) and the 10-year US yields (TNX) briefly diverged during Apr-Aug 2020 via a higher-low in TYX and a lower-low in TNX. However, since Sep 2020, a series of higher-lows suggests the return to its normal direct historical relationship. A higher-high in TYX and TNX above 1.67% and 0.904%, respectively would reaffirm rising rates. TYX and TNX also still need to negate head/shoulders tops. Breakouts are confirmed above 1.761% and 0.957%, respectively.

Commodities – CRB Index continues to be confined to a volatile trading range between 142.59-142.70 (key support) and 152.73-155.69 (key resistance). WTI Crude Oil continues to struggle at intermediate-term resistance at 43-45. The key initial support is 34.36-36.75. Violation here warns of the next decline to 28.5-29.5. Gold has broken out above its initial resistance at 1,920-1939.5. This breakout renders the next rally to 1,984-2,025, and then to 2,089.20 (8/7/20 all-time high). Key initial support is 1,845-1,851, and then 1,774-1,789.

Currencies – US Dollar (USD) is transitioning into a potentially bearish 3-mo head and shoulders top pattern. Neckline support is 91.75-92.46. Violation of support confirms a technical breakdown and suggests a decline to 88.71-89.42. Key resistance is at 93.97-94.33, and then 94.79. EURUSD remains in a volatile environment as defined by a near-term trading range between 1.1605-1.1613 (key support) and 1.19-1.1917, 1.1966, and 1.2012 (key resistance). JPYUSD has now broken out above 0.9599-0.9615, and this suggests an upside target to 0.987 (3/9/20 high).

S&P 500 Sectors – In the past eight weeks ending on Nov 2, 2020, the S&P 500 sector rotations have favored the defensive sectors. Although Consumer Discretionary (XLY +4.8%) has joined Technology (XLK +7.9%) and Communication Services (XLC +6.8%) in the Weakening Quadrant, the three cyclical sectors retain intermediate-to-longer term bullish trends. Materials (XLB +5.0%) and Industrials (XLI +5.2%) retain their leadership roles within the Leading Quadrant. Energy (XLE -9.9%) continues to weaken and is the only S&P sector residing in the Weakening Quadrant. Healthcare (XLV +5.5%) has now joined Utilities (XLU +9.8%), Real Estate (XLRE +0.8%), Consumer Staples (XLP +1.3%), and Financial (XLF +1.6%) in the Improving Quadrant.

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