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Technical Report for the Week of 12/7/20

Technical Summary


Equities – The 3-months triangle pattern between 3,209.5-3,234 (9/24 and 10/30/20 lows) and 3,588-3,646 (9/2 and 11/9/20 highs) has been resolved in favor of the bulls. The 11/9/20 breakout renders the next SPX target toward 3,773 (recent 1-mo breakout above 3,646), and above this to 3,967-4,082 (triangle breakout target), intermediate-term), and then to 4,595 (Aug 2002 V-breakout projection, longer-term). Initial support rises to 3,634-3,646 (12/1/20 gap-up breakout), and below this to 3,550-3,588 (11/9/20 gap-up breakout), and then to 3,485-3,502 (50-day ma and the extension of the triangle). Intermediate-term support remains at 3,116-3,159 coinciding with the 7/9/20 low and the 200-day ma.


Fixed Income – The 30-year US yields (TYX) and the 10-year US yields (TNX) temporarily diverged during April-August 2020 via a higher-low in TYX and a lower-low in TNX. Since September 2020, a series of higher-lows and now higher-highs suggest the return to its direct relationship and the potential for higher US interest rates, intermediate-term. A TYX breakout above 1.761-1.767%/1.83% reaffirms the next TYX rally toward the next key resistance at 1.940%. A TNX breakout above 0.957-0.975%/0.989% suggests the next TNX rally toward the next key resistance at 1.171-1.266%.


Commodities – CRB Index has broken out above 154.65-155.69 prompting the next rally toward 166.5-168. Initial support rises to 154.65-155.26 (recent breakout and 8/31 and 11/11/20 highs). WTI Crude Oil has broken out above intermediate-term resistance at 43-45. The breakout hints at the next rally toward 48.60 and then to 50.5-52. Initial support rises to 43.06-43.78, 40.59-40.82, 39.63, and then 36.13-36.63. Gold continues with its consolidation. 1,767.20 or the 11/30/20 low is key initial support. Initial resistance falls to 1,883, 1,934-1966, 1984-2,025, and then 2,089.20.


Currencies – The US Dollar (USD) has confirmed a 3-month head and shoulders top pattern breakdown below neckline support at 91.75-92.46. The breakdown renders downside to 88.71-89.08/88.15. Initial resistance is 91.75-92.12, 93, and then 94.33-94.79. EURUSD has broken out of its 3-month trading range above 1.2012 (12/1/20). The breakout renders the next target to 1.235 and then to 1.2555. The key initial support rises to 1.2012 and then 1.182. JPYUSD has also broken out above 0.9599-0.9615. The breakout hints of the next JPYUSD rally to 0.9692 and then to 0.987. Initial support is at 0.9538-0.9546.

S&P 500 Sectors – In the past eight weeks ending on Nov 30, 2020, the S&P 500 sector rotations have dramatically changed. Only one S&P sector now resides in the Leading Quadrant (Industrials – XLI). Most S&P sectors are currently residing in two quadrants. In the Weakening Quadrant are Consumer Discretionary (XLY), Technology (XLK), Communication Services (XLC), and Materials (XLB). In the Improving Quadrant are Healthcare (XLV), Utilities (XLU), Real Estate (XLRE), Consumer Staples (XLP), and Financial (XLF). The rotations denote overbought conditions in some sectors and hence corrections (Weakening Quadrant) and oversold conditions in other sectors (Improving Quadrant).


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