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Technical Report for the Week of 12/12/22

Equities – Despite the recent SPX breakout above the 200-day ma (4,037), the 10/13/22 SPX oversold rally stalled at 4,100.51 (12/1/22) or just under the Jan/Mar 2022 primary downtrends at 4,076/4,125. A 1-month head/shoulders top warns of consolidation. Violation of neckline support at 3,906.5-3,918 (11/17 and 12/6/22 lows) confirms a top and warns of the next decline to 3,818-3,860 (11/10/22 gap-up and 50-day ma) and below this 3,698-3,721.5 (July/Nov 2022 lows and 1-mo h/s top target).

Fixed Income – The 10-year minus 3-mo yield spread continues to contract (-0.74) as it nears Jan 2001 extreme low (-0.95). Will it soon bounce? The 10-year minus 2-year continues to contract, setting another chart low of -0.84 (Dec 2022). Based on the prior 6 inversions, this implies the next US recession around Dec 2022-Feb 2023. TNX – Correction from 4.333% (10/21 high) tests key support at 3.48-3.64% (Sept 2022 breakout, Oct 2022 low, Dec 2022 uptrend, and 38.2% retracement from the Aug-Oct rally). Initial resistance is 3.690-3.87%.

Commodities – CRB has weakened as it tests key support at 261-264 (61.8% retracement from Dec 2021-Jun 2022 rally and the Sept 2022 low). Key initial resistance is 277-280 (50-day ma) and 285.5-288 (Oct/Nov highs and the 10-month ma). WTI Crude tests key support at 70-73 (30-mo ma). Initial resistance falls to 83-85 (50-day ma) and 93-94 (Oct/Nov highs/10-mo ma). Gold rebounded from 1,618-1,622 (Sept/Oct/Nov 2022 lows) and nears key resistance at 1,823-1,837 (Sept 2021 and Aug/Dec 2022 highs). Initial support rises to 1,778-1,792.

Currencies – USD – 6 negative outside days (9/28, 10/13, 10/21, 11/10, 11/30, 12/7) led to a recent correction to pivotal support at 104-105.5. Initial resistance is 109-109.5 (50-day ma). EURUSD – 6 positive outside days ( 9/28, 10/13, 10/21, 11/10, and 11/30) led to recovery to key resistance at 1.035-1.037 and 1.06-1.0787. Initial support is 1.01-1.04. USDJPY – A negative outside day (10/21/22) triggered consolidation toward key support at 133-135.5 (200-day and 10-mo ma). Initial resistance is 137.5-140 (12/1/22 breakdown and Jul and 11/30/22 highs).

S&P 500 Sectors – RRG study shows minor changes from the previous week, as six S&P sectors remain in the Leading Quadrants. Energy (XLE), Financial (XLF), and Healthcare (XLV) weaken, and Consumer Staples (XLP), Materials (XLB), and Materials (XLB) strengthen within the Leading Quadrant. Consumer Discretionary (XLY), Utilities (XLU), Communication Services (XLC), Technology (XLK), and Real Estate (XLRE) strengthen, and Consumer Discretionary (XLY) weaken within the Lagging Quadrant.

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