Technical Report for the Week of 11/16/20
Equities – SPX has been confined to a 2-to-3 months trading range between 3,209.5-3,234 (9/24 and 10/30/20 lows and 3,588-3,646 (9/2 and 11/9/2 all-time highs). The trading range is nearing a critical phase. A convincing breakout above 3,588-3,646 suggests SPX targets to 3,967-4,082 (triangle breakout target), intermediate-term, and then to 4,595 (Aug 2002 V-breakout projection, long-term. Initial support rises to 3,511-3,521.5 (Sep 2020 downtrend and 11/9/20 gap-up), and below this to 3,389.5-3,405 (11/4/20 gap-up and the 50-day ma), 3,330-3,336 (9/28/20 and 11/3/20 gap-ups), 3,209.5-3,234 (Sep/Oct 2020 lows), and then 3,116-3,140 (7/9 low and 200-day ma).
Fixed Income – The 30-year US yields (TYX) and the 10-year US yields (TNX) temporarily diverged during Apr-Aug 2020 via a higher-low in TYX and a lower-low in TNX. Since Sep 2020, a series of higher-lows suggests the return to its direct historical relationship. Recent breakouts above 1.67% (TYX) and 0.94% (TNX), if sustained, reaffirm rising US interest rates, at least from an intermediate-term perspective. TYX’s next key resistance is at 1.840%, 2.14%, and then 2.35-2.45%. TNX next key resistance is at 0.989%, 1.171-1.266%, and then 1.353-1.487%.
Commodities – CRB Index continues to struggle to clear the top of its trading range between 142.46-142.59 (key support) and 154.65-155.69 (key resistance). WTI Crude Oil has once again failed to break out above pivotal intermediate-term resistance at 43-45. The key initial support is 39 (10-wk ma), 36-37, and then to 33.64 (11/2/20 low). Gold continues with its near-term consolidation. Key initial support is 1,845-1,859, 1,770-1,790, and 1,672-1,695. Key initial resistance is 1,911-1939.5, 1,966-1,984, 2,001-2,025, and then to 2,089.20 (8/7/20 all-time high).
Currencies – US Dollar (USD) continues to send out mixed signals. On a near-term basis, a 3-mo head and shoulders top pattern warns of technical weakness. Violation of neckline support at 91.75-92.46 warns of the next decline to 88.71-89.08. The key resistance is 93.97-94.33 and then 94.79. EURUSD remains confined to a trading range between 1.1605-1.1613 (key support) and 1.19-1.1917-1.1920, 1.1966, and 1.2012 (resistance). JPYUSD has rebounded from the key initial support at 0.9424-0.9463. The key initial resistance is at 0.9599-0.9615/0.9692.
S&P 500 Sectors – In the past eight weeks ending on Nov 9, 2020, the S&P 500 sector rotations continue to favor the defensive sectors. Consumer Discretionary (XLY 6.9%) and Technology (XLK 8.7%) continue to correct within the Weakening Quadrant. Communication Services (XLC 9.4%) has now joined Energy (XLE 2.5) in the Weakening Quadrant. Materials (XLB 5.0%) and Industrials (XLI 9.3%) retain their leadership roles within the Leading Quadrant. Healthcare (XLV 6.7%), Utilities (XLU 13.9%), Real Estate (XLRE 6.0%), Consumer Staples (XLP 6.7%), and Financial (XLF 10.1%) continue to improve within the Improving Quadrant.
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