Technical Report for the Week of 7/20/20
Equities – On the monthly chart, SPX retains its structural uptrend channel from 2009 between 2,510-2,750 and 3,564-3,645. The ability of SPX to rebound strongly from its March 2020 low, trade above the bottom of the 2009 uptrend channel, and above the 10-mo and 30-mo moving averages hint of an SPX rally to the top of its 11-year channel. On the weekly chart, a golden cross buy signal and a 1-year complex head/shoulders bottom has developed. So, does this imply a V, U, or W-type recovery? On the daily chart, an ascending triangle continues to develop between 3,046 and 3,233-3,238. Since the technical base is 267.5-273 points a convincing breakout above 3,238 renders technical targets to 3,260-3,328.5 (2/24/20 gap-down), and above this to 3,338-3,393.5 (1/222/20 and 2/19/20 all-time highs), and then to 3,500-3,511 (ascending triangle breakout target). Initial support rises to 3,116-3,128 (7/9 and 7/14/20 lows) and 3,033-3,048 (200-day/50-day ma and triangle).
Fixed Income – The 10-year and 30-year US Treasury yields (TNX and TYX) suffered bearish island reversals on 6/9/20. This technical development coupled with 4-mo head/shoulders and failed attempts to breakout above key resistances at 1.76-1.83% and 0.957-0.989%, respectively warn of key tests of neckline supports. For TYX below 1.26% confirms an h/s top breakdown and suggests the next decline to 0.837% or the March 2020 low. For TNX below 0.543% confirms a neckline breakdown and renders a retest of the March 2020 low at 0.398%.
Commodities – CRB Index continues with its recovery but is beginning to show signs of slowing near 144.67 (50% retracement from Dec 2019-Apr 2020 decline). Key initial support rises to 139.5-140, and below this to 133.5-134.5, 125-128, and then to 118.5-121. WTI Crude Oil continues to challenge major resistance at 39.5-43.5 or the March 2020 h/s top breakdown, 61.8% retracement from the Jan-Apr 2020 decline, and the pivotal 30-wk ma. Key initial support is 36-37.5, and below this to 29-31. Gold’s recent 3-mo triangle breakout above 1,776-1,789 suggests +123 points or a target to 1,899-1,912. Initial support rises to 1,743-1,776.
Currencies – Although a 5-year head/shoulders bottom is still intact the USD has struggled to clear key initial resistance at 97.75-98.25 (200-day and 50-day ma). This suggests a consolidation toward key initial support at 94.61-95.71 to retest the March and June 2020 lows. EURUSD has strengthened but is now encountering key resistance at 1.1493 (June 2020 high). Key initial support rises to 1.106-1.116 coinciding with the 50-day, 200-day, 10-wk, and 30-wk ma. JPYUSD continues with a neutral trading range between key initial support at 0.923-0.931 (50-day and 200-day ma) and key initial resistance at 0.9427-0.9434 (May and June 20 highs).
S&P 500 Sectors – Market breadth continues to broaden further as S&P 500 sector rotations currently show 7 of the 11 major S&P 500 sectors residing in the Leading and Improving Quadrants. The fact that many of the economically sensitive S&P sectors are also residing within the Leading and Improving Quadrants strongly suggests the US economic recovery and US stock market rally can continue. Several key sector rotations to monitor this week. Technology (XLK) and Communication Services (XLC) continue to correct within the Leading Quadrant. The Energy (XLE) sector appears to have peaked within the Improving Quadrant. This warns of another Energy downturn. Healthcare (XLV) is turning higher within the Weakening Quadrant. This suggests the recent consolidation is ending as XLV once again regains its sector leadership.
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