Technical Report for the Week of 12/14/20
Equities – The SPX yearly chart indicates the outcome of an outside year pattern will decide the next structural trend. A positive outside year reaffirms the resumption of the structural bull. A negative outside year warns of the next structural bear decline. A yearly close near the mid-point of its yearly range signals the continuation of a volatile trading range. The weekly SPX chart shows the 2-plus year broadening top breakout above 3,600-3,620 hints of the resumption of the 2009 uptrend channel, and renders SPX target to 4,231. The SPX daily chart shows two breakouts – a 3-mo triangle breakout above 3,588-3,646 (11/9/20) and a 1-mo breakout above 3,646 (12/1/20). The breakouts render SPX targets to 3,712.39, 3,773, and then to 3,967-4,082. Initial support is 3,634-3,646, 3,550-3,588, and then 3,485-3,518.
Fixed Income – The 30-year US Treasury yields (TYX) and the 10-year US Treasury yields (TNX) temporarily diverged during Apr-Aug 2020 via a higher-low in TYX and a lower-low in TNX. However, since September 2020, a series of higher-lows and higher-highs suggest the return to a direct relationship of higher US interest rates, intermediate-term. A TYX breakout above 1.761-1.767%/1.83-1.88% reaffirms the next TYX rally toward 1.940% and then 2.14-2.17%. A TNX breakout above 0.957-0.975%/0.989-1.095% also suggests the next TNX rally toward 1.171-1.266%.
Commodities – CRB Index has broken out above 154.65-155.69, prompting the next rally to 166.5-168. Initial support rises to 154.65-155.26 or the recent breakout and the 8/31 and 11/11/20 highs, and below this to 152-153. WTI Crude Oil has broken out above intermediate-term resistance at 43-45. The breakout hints at the next rally to 48.60, and above this to 50.5-52. Initial support rises to 43.06-43.78, 40.25-41.5, 36.13-36.63, and 33.64. Gold continues with its consolidation. Key support remains at 1,767.20 (11/30/20 low). Initial resistance is 1,879-1,880, 1,924-1,966, and then to 1,984-2,025/2,089.20.
Currencies – US Dollar (USD) has completed a 3-mo head and shoulders top breakdown below 91.75-92.46. The breakdown warns of a downside target of 88.71-89.08/88.15. Initial resistance is 91.75-92.12, 92.5, 94.5, and 95.75. EURUSD has broken out of its 3-mo technical base above 1.2012 (12/1/20). The breakout suggests targets to 1.235, 1.2419, and then to 1.2555. The key initial support is 1.2012-1.2059 and 1.186-1.192. JPYUSD continues to consolidate gains within a trading range between 0.9538-0.955 (50-day ma) and 0.9546 (11/6/20 high).
S&P 500 Sectors – In the past eight weeks ending on Dec 7, 2020, three major S&P rotations have occurred. Financial (XLF) and Communication Services (XLC) join Industrials (XLI) in the Leading Quadrant. Consumer Discretionary (XLY), Technology (XLK), and Materials (XLB) continue to correct within the Weakening Quadrant. Real Estate (XLRE) has slipped into the Lagging Quadrant. Healthcare (XLV), Utilities (XLU), Energy (XLE), and Consumer Staples (XLP) remain in the Improving Quadrant. XLE has improved on price momentum, and XLP has weakened and may slip into the Lagging Quadrant.
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