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Technical Report for the Week of 8/15/22

Equities –S&P 500 Index 6/17/22 oversold rally nears a critical test of its intermediate-term resistance at 4,329-4,367, coinciding with the 200-day ma (4,329), Jan 2022 downtrend (4,354), and the 61.8% retracement (4,367) from the Jan 2022-Jun 2022 decline. A convincingly move above 4,329-4,367 coupled with a surge above 4,595-4,637 (Feb/Mar 2022 highs or right shoulders) reverses the Jan 2022 primary downtrend. Initial support rises to 4,177-4,189 (8/10/22 gap-up breakout) and below this 3,946-3,953 (7/19/22 breakout and 50-day ma).

Fixed Income – The 10-year minus 3-mo yield spread contracted to 0.04 (8/1/22) or nears an inversion. An oversold condition hints at a bounce to initial resistance at 0.39-0.43, 0.91-0.96, and 1.40-1.48. The 10-year minus 2-year spread inverted in Apr 2022 (-0.06), and the inversion continues in Aug 2022 (-0.48). The bond market warns of a US recession this year or next year. TNX has stalled at structural resistance near 3.04-3.25%. A head/shoulders top breakdown below the neckline at 2.746% hints at a decline toward 2.29%, 2.0%, and then 1.87%.

Commodities –A negative outside month (Jun 2022) led to 273.26 (7/15/22) or near 275-280 (200-day ma and 10-mo ma), prompting another rally to initial resistance at 296-297, 310, 315.5-320.5, 329.59. WTI Crude’s correction nears support at 85-88 (1/18/22 breakout, Feb/Aug 2022 lows, and 61.8% retracement). Initial resistance is 95, 101-103.5, 105-107.5, 114-116.5. Gold rebounds from intermediate-term support at 1,672-1,678 (Jun 2020, 2021, and Jul 2022 lows). Next resistance is 1,842-1,858/1,880-1,883.

Currencies – US Dollar’s next target is 118.59-121.21. Recent correction rebounds from support at 104-104.5 (Aug 2022 lows, May breakout, and 2021 uptrend). EURUSD broke neckline support at 1.0339-1.0456, prompting a decline to 0.9912 (7/14/22 low). The recent oversold rally fades near key initial resistance at 1.033-1.0368 and 1.04. JPYUSD’s breakdown below 0.740 (2002 low) renders a downside target at 0.6784-0.6819. An oversold rally fades near initial resistance at 0.7613-0.7668 (May 2022 low and the Aug 2022 high).

S&P 500 Sectors – RRG study shows improvements. Technology (XLK), Consumer Discretionary (XLY), and Communication Services (XLC) have improved within the Improving Quadrant. XLK is close to entering the Leading Quadrant. Industrial (XLI), Consumer Staples (XLP), Materials (XLB), Utilities (XLU), and Energy (XLE) remain in the Weakening Quadrant. XLE continues to weaken further. XLI shows signs of stabilizing. Real Estate (XLRE), Materials (XLB), and Financial (XLF) remain entrenched within the Lagging Quadrant.

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