Technical Report for Week of 02/28/22

Technical Summary

Equities – The 1/4/22 to 2/24/22 correction of 14.61% places SPX firmly into the threshold of a deep correction. Is the 2/24/22 low at 4,114.65 a technical breakdown or a successful test of support? The decline is inconclusive, neither sufficient to confirm a technical breakdown nor a successful test of pivotal support. Another oversold condition has developed. The outcome of this oversold rally is critically important as it will help determine the next SPX directional trend. Key initial resistance is 4,409 (61.8% retracement from 2/9-2/24/22 decline), and above this to 4,461-4,559 (200-day ma, 50-day ma, and the Jan 2021 downtrend), and 4,591-4,595 (2/2 and 2/9/22 reaction highs). Key initial support is 4,025-4,114.65 (2/24/22 low and the 50% retracement from 10/30/20 to 1/4/22 rally).

Fixed Income – The 10-year minus 3-mo yield spread differs from the 10-year minus 2-year spread as it continues to expand. A breakout above 1.71-1.73 (Mar 2021 and Jan/Feb 2022 highs) reaffirms steepening trend. Initial support is 1.53-1.57, 1.45, and 1.29-1.40. The short-end (i.e., 3-mo, 1-year, and 2-year) have risen sharply, possibly discounting the Fed tightening actions into the March FOMC meeting. TNX breakout above 1.693-1.765% renders a target at 2.15-2.33%. Initial support is 1.70-1.765%, 1.44-1.53%, and 1.343%.

Commodities – CRB has achieved targets at 267.87-269 (61.8% retracement from 2011-2020 decline and top of the 2021 uptrend channel). An overbought condition warns of consolidation to 247.61 (50-day ma) 241.18 (Jan 2022 breakout). WTI Crude Oil achieved targets at 93.5/96-97 (61.8% retracement from 2008-2020 decline and Sep 2021 breakout target). An overbought condition warns of consolidation to support (86.5-87.5, 82-85, and 77-79). Gold has broken out of a 2-year triangle pattern above 1,859-1,879.5.

Currencies – US Dollar tests key initial resistance at 97.44-97.81 (Jun 2020 and Jan/Feb 2022 highs). Initial support is 95.14-96.0 (Jan 2022 low and 50-day ma). EURUSD rebounds from key initial support at 1.1107-1.1107 (Jan/Feb 2022 lows). Key initial resistance is 1.133-1.14 (50-day ma and 2/16/22 high) and 1.1483-1.1495. JPYUSD retests its Jan/Feb 2022 lows at 0.8595-0.8596. Breakdown suggests 0.8427-0.8453. Key resistance is 0.8740-0.8758/0.8812-0.8886 (Jan/Feb 2022 highs), and 0.8872-0.8886 (Nov 2021 highs).

S&P 500 Sectors – The RRG study shows continued rotation into the defensive, commodity-based, and interest-rate-sensitive S&P sectors. Healthcare (XLV) joins Financials (XLF), Utilities (XLU), Consumer Staples (XLP), Energy (XLE), and Materials (XLB) in the Leading Quadrant. Communication Services (XLC) joins Industrial (XLI) within the Improving Quadrant. Real Estate (XLRE) joins Technology (XLK) in the Weakening Quadrant. Consumer Discretionary (XLY) improves within the Weakening Quadrant.

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