Equities – SPX – 10/13 to 12/13/22 oversold rally failed to clear the top of its 1-year downtrend channel (4,066-4,113), suggesting the resumption of the primary downtrend. The next support is 3,818-3,860/3,796 (11/10/22 gap-up/ 50% retracement from Oct-Dec rally), 3,698-3,724 (11/3 higher low, 1-mo breakdown target, and the 61.8% retracement), 3,637 (Jun 2022 low), and 3,491.5-3,584 (Sept and Oct 2022 lows). Initial resistance is 3,906.5-3,926 (12/15/22 break down), 3,958-3,966 (12/15/22 gap-down), 4,027-4,066 (200-day), and 4,100-4,119.
Fixed Income – The 10-year minus 3-mo yield spread continues to contract (-0.83) as the inversion deepens. A successful test of -0.95 (Jan 2001 all-time low) hints at a technical bounce from -0.49 to -0.33. The 10-year minus 2-year has also contracted. Based on the prior 6 inversions, a recession is possible as early as Dec 2022 to Feb 2023. TNX – Correction from 4.333% (10/21 high) tests key support at 3.48-3.64%. A breakdown suggests next support at 2.90-3.15%. Initial resistance is 3.63-3.69% and 3.85%.
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 285.5-289 (Oct/Nov highs and the 10-month ma). WTI Crude tests key support at 70-73 (2008 channel breakout and the 30-mo ma). Initial resistance is 83-85 (50-day ma) and 93.5-94 (10-mo ma). Gold rebounds from 1,618-1,622 (Sept/Oct/Nov 2022 lows) to resistance at 1,823-1,837 (Sept 2021/Aug/Dec 2022 highs). Support is 1,778-1,792 and 1,719-1,738.
Currencies – USD – The recent correction has violated pivotal support at 104-105.5, suggesting a decline to 101.5-102.5. Initial resistance is 105.5 and 108.5-109.5. EURUSD – The recovery test key resistance at 1.06-1.0787. A negative outside day on 12/15/22 warns of a pullback to initial support at 1.03-1.05 (200-day ma). 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 (Dec breakdown, Jul/Dec, and 11/30/22 highs).
S&P 500 Sectors – RRG study shows similar changes from the previous week with six sectors retaining positions in the Leading Quadrants and six sectors retaining positions in the Lagging Quadrants. Energy (XLE), Financial (XLF), and Healthcare (XLV) weaken, and Consumer Staples (XLP), Materials (XLB), and Industrials (XLI) strengthen in the Leading Quadrant. Utilities (XLU), Real Estate (XLRE), Technology (XLK), and Communication Services (XLC) strengthen, and Consumer Discretionary (XLY) weaken in the Lagging Quadrant.
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