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Technical Report for the Week of 8/22/22

Equities – SPX 6/17/22 oversold rally faded near intermediate-term resistance at 4,321-4,367, coinciding with the 200-day ma (4,321), Jan 2022 downtrend (4,346), and the 61.8% retracement (4,367) from the Jan 2022-Jun 2022 decline. A breakout above 4,321-4,367 and a surge above 4,595-4,637 (Feb/Mar 2022 highs or the right shoulders) reverses the Jan 2022 primary downtrend. The consolidation may confirm a cyclical bear top or a bottom. Initial support is 4,147-4,177.5 (8/10/22 gap-up breakout) and 3,946-3,967 (7/20/22 breakout and 500-day ma).

Fixed Income – The 10-year minus 3-mo yield spread contracted to 0.04 (8/1/22). Is this a bottom, or will it decline to the Feb 2020 low (-0.20) and the Aug 2019 low (-0.52)? The 10-year minus 2-year spread inverted in Apr 2022 (-0.06). A second inversion occurred in Aug 2022 (-0.48). Is the bond market discounting an economic recession? Is the worse behind us? TNX has broken the neckline at 2.746%, suggesting a decline to 2.32%, 2.0%, and then 1.92%. Above 3.17-3.25% or the left/right shoulders negates the head and shoulders top.

Commodities – CRB - A negative outside month (Jun 2022) led to a decline to 273.26 (7/15/22) or near the 200-day ma and 10-mo ma. A trading range is developing between 273-276 and 295-297. WTI Crude continues to weaken near key support at 85-88 (1/18/22 breakout, Feb/Aug 2022 lows, and the 61.8% retracement). Initial resistance is 95 (200-day ma) and 100.5-102 (50-day ma). 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 rebounds from pivotal support at 104-105 (Jun 2022 breakout and the Aug 2022 low). USD nears key initial resistance at 109.14 (7/14/22 high). EURUSD oversold rally faded near resistance at 1.028-1.0368 (50-day ma, May/Jun lows, and Feb downtrend), prompting a retest of 0.9952 (7/14/22 reaction low). JPYUSD’s breakdown below 0.740 (2002 low) warns of 0.6784-0.6819. An oversold rally faded near 0.7613-0.7668 (May 2022 low and the Aug 2022 high), suggesting a retest of 0.715 (7/14/22 low).

S&P 500 Sectors – RRG study shows minor changes in the past week. Technology (XLK) moves into the Leading Quadrant. Consumer Discretionary (XLY) strengthens, and Communication Services (XLC) weakens in the Improving Quadrant. Industrial (XLI), Consumer Staples (XLP), Healthcare (XLV), Utilities (XLU), and Energy (XLE) remain in the Weakening Quadrant. Real Estate (XLRE) and Financial (XLF) improve, and Materials (XLB) weaken in the Lagging Quadrant.

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