Technical Report for the Week of 8/29/22
Equities –The 18.93% SPX oversold rally from 6/17/22 faded at 4,325.28 (8/16/22) near intermediate-term resistance at 4,307-4,367, coinciding with the 200-day ma, Jan 2022 downtrend, and the 61.8% retracement from the Jan 2022-Jun 2022 decline. A gap-down on 8/22/22 and a subsequent negative outside day on 8/26/22 warn of consolidation to key initial support at 3,946-3,996 (7/20/22 breakout and 50-day ma) and 3,845-3,875. Key initial resistance falls to 4,195-4,219 and 4,307-3,367.
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) or 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 or is this a deeper recession? 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 successful bottom at 273.26 (7/15/22) or near the 200-day ma and 10-mo ma. The next resistance is 295-297 and 315-316. WTI Crude rebounds from support at 85-88.5 (1/18/22 breakout, Feb/Aug 2022 lows, and the 61.8% retracement). Initial resistance is 95-98.5 (8/11/22 high and 50-day/200-day ma). Gold rebounds from pivotal intermediate-term support at 1,672-1,678 (Jun 2020, 2021, and Jul 2022 lows). Key initial resistance is 1,840.5-1,854 and 1,879.5-1,882.5.
Currencies –US Dollar nears key initial resistance at 109.14-109.21 (Jul and Aug 2022 highs). Initial support is 106 (50-day ma) and 105-105.5 (May/Jun 2022 highs). EURUSD oversold rally faded at 1.023-1.0368 (50-day ma, May/Jun lows, and Feb downtrend). Initial support is 0.9901-0.9952 (Jul/Aug lows). 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 reaction low).
S&P 500 Sectors – RRG study shows few changes from the past week. Technology (XLK) remains in the Leading Quadrant. Consumer Discretionary (XLY) moves closer to entering the Leading Quadrant, 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) strengthens and Materials (XLB) bottoms in the Lagging Quadrant.
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