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Technical Report for the Week of 6/22/20

Updated: Jun 22, 2020

Technical Summary

Equities – Although a retest of its all-time SPX high (3,393.52) is still possible later in the year, a bearish island reversal (6/11/20) coupled with a negative outside day (6/19/20) warns of consolidation to initial support at 2,988-3,018.5 coinciding with the top of the 5/26/20 gap up and the 200-day ma), and below this to secondary support at 2,946-2,957 (5/26/20 gap-up breakout and 50-day), and then to 2,835-2,914 (38.2% retracement from Mar-Jun 2020 and 5/18/20 gap up). The contraction of the spread (66.67) between the 50-day ma (2,952) and the 200-day ma (3,018.5) will help to determine the next directional trend of SPX. A golden cross buy signal (50-day ma crossing above 200-day ma) bodes well for the next sustainable SPX rally. However, failure of the 50-day ma to cross above the 200-day ma warns of a deeper correction into the summer.

Fixed Income – Historically, the close relationship between the Copper/Gold ratio (CGR) and the 10-year US Treasury yields (TNX) is an important longer-term trend. A major TNX bottom may have developed during Mar 2020 as the CGR rebounded from major support corresponding to the 1980/1987 lows. The 30-year US Treasury yield (TYX) may have bottomed as evidenced by a series of higher-lows (i.e., 1.126%, 1.251%, and 1.394%). TYX key resistance is at 1.76-1.83%. The 10-year US Treasury yields (TNX) also shows higher-lows (0.543%, 0.581%, and 0.648%). Key resistance remains at 0.957-0.989%.

Commodities – CRB Index rallied strongly from key support at 101.48 (4/21/20 low) and is now challenging next key resistance at 144.67 (50% retracement from Jan-Apr 2020 decline). Key initial support is 131.5-133.5, and below this to 127.5-128, 124-126, and then to 118.5-121. WTI Crude Oil is improving as a positive outside week (6/15/20) hints of a retest of major resistance at 41-43 (Mar 2020 h/s top breakdown, 61.8% retracement from the Jan-Apr 2020 decline, and the pivotal 30-wk ma). Gold continues with its near-term consolidation via a 3-mo triangle pattern between 1,666-1,672 and 1,756-1,789.

Currencies – USD has weakened. However, it is now rebounding from key support at 95.71 (6/10/20) coinciding with the Mar, Jun, and Dec 2019 lows. The key initial resistance is 97.0-97.5 or the bottom of the 2018 downtrend channel). A convincing breakout renders the next rally to 98.30-98.89 (50-day and 200-day ma). EURUSD has strengthened but failed to clear key resistance (1.14-1.1422) warns of a correction to key initial support at 1.10-1.108 or the top of the 2018 uptrend channel, 50-day ma, and 200-day ma. JPYUSD has encountered key resistance at 0.9365-0.9383 (Jun/Oct 2019 & Jun 2020 highs). Key support is 0.923-0.930 (50/200-day ma).

S&P 500 Sectors – In the past 8 weeks ending on June 8, 2020, SPX continues with several key sector rotations. Healthcare (XLV -0.5%) has quietly slipped into the Weakening Quadrant. This suggests a near-term consolidation. Technology (XLK 15.4%), Communication Services (XLC 14.1%) and Consumer Discretionary (XLY 13.5%) retain their leadership roles within the Leading Quadrant. Consumer Staples (XLP 1.5%), Utilities (XLU -1.4%), and Real Estate (XLRE 6.9%) continue to move deeper into the Lagging Quadrant. Financial (XLF 10.4%) is improving within Lagging Quadrant but is close to entering the Improving Quadrant. Energy (XLE 14.3%), Industrials (XLI 12.4%), and Materials (XLB 12.7%) continue to show technical signs of improvements within the Improving Quadrant. XLB is nearing a move into the Leading Quadrant.

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