Equities – SPX has declined 27.54% to a low of 3,491.58 (10/13/22). The ability to find support along the 50% retracement (3,505) from the 2020-2022 rally and the Aug 2020 V-pattern breakout (3,393.5) has led to another oversold rally. The 13-day 12.03% oversold rally encountered key resistance at 3,907-3,946 (6/28, 7/8, and 9/21/22 highs, and the50% retracement from 8/16-10/13/22 rally). A negative outside day (11/1/22) warns of a pullback to initial support at 3,698-3,700 and below this at 3,637-3,647, 3,584, and 3,491.58.
Fixed Income – The 10-year minus 3-mo yield spread continues to contract from 0.04 (8/1/22), setting a lower low at -0.17 (10/28/22). The next support is -0.20 to -0.52 (Feb 2020 and Aug 2019 lows). The 10-year minus 2-year also continues to contract. With the 10-yr-3-mo and the 10-yr-2-yr spreads trading in sympathy, does this signal a deeper recession? TNX breakout above 3.248-3.483% suggests 4.4-4.5% (top of 2021 uptrend channel and Sept 2022 breakout target). Initial support is 3.84-3.91, 3.48-3.72, 3.25, and 2.53-2.89%.
Commodities – CRB rebounds from key support at 261-264 (61.8% retracement from Dec 2021-Jun 2022 rally and the Sept 2022 low). Rally nears key resistance at 285.5-289 (200-day ma). WTI Crude found pivotal support at 76.25 (9/26/22), prompting a recovery to key initial resistance at 93.64 and 97-98 (200-day ma). Gold rebounded from key support at 1,618-1,622 (Sept/Oct/Nov 2022 lows). The oversold rally near key initial resistance at 1,673-1,691 (Sept/Oct 2022 highs and Dec 2021 low) and then 1,739-1,753.
Currencies – USD can rally to 118.59-121.21. An inside month (Oct 2022), a potential inside month (Nov 2022), and three negative outside days (9/28, 10/13, and 10/21) warn of consolidation to key support at 109-110. EURUSD support is 0.9330-0,954 (May 2002 breakout and Sept 2022 low). Inside month (Oct 2022), potential inside month (Nov 2022), and 3 positive outside days hint at an oversold rally to 0.9952-1.00 and 1.0093-1.0198. USDJPY’s 20 and 30-year breakouts suggest 152-152.5 and 160.35. Initial support is 145-146 and 139.5-141.5.
S&P 500 Sectors – RRG study shows rotations from growth to value. Value sectors such as Healthcare (XLV), Financial (XLF), Industrials (XLI), and Energy (XLE) strengthen in the Leading Quadrant. Also, Materials (XLB), improves in the Improving Quadrant. Consumer Discretionary (XLY) and Utilities (XLU) weaken, and Consumer Staples (XLP) strengthen in the Weakening Quadrant. Communication Services (XLC), Technology (XLK), and Real Estate (XLRE) remain in the Lagging Quadrant.
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