Weekly Technical Report for the week of May 18, 2020
Equities – The +35.81% Mar-Apr 2020 oversold rally has encountered key intermediate-term resistance at 2,934.5-2,955 (61.8% retracement from Feb-Mar 2020 decline, 200-day ma, and 4/29/20 high). Although a breakout here would confirm the 3/2/20 low as major bottom and signal a retest of its all-time high (3,393.52) an overbought condition suggests a near-term consolidation before the next sustainable rally. A trading range is likely between key initial support at 2,727-2,767 (4/21/20 and 5/14/20 lows) and 2,946-2,955 (4/29/20 and 5/12/20 highs).
Fixed Income – US Treasury yields are attempting to recover from historical lows established during Mar 2020 timeframe. Although US rates may be following the global interest rate trends toward near zero and possibly negative rates, near-to-medium term bottoms may be developing via higher-low patterns (3/9/20 and 4/21/20 lows). For TYX it is 0.837% and 1.126%, and for TNX it is 0.398% and 0.543%. From a near-term trading perspective, a 2-month trading range has also developed. For TYX it is between 1.126-1.193% and 1.417-1.445% and for TNX it is between 0.543-0.568% and 0.7260-0.784%.
Commodities – CRB Index has found key support at 101.48 (4/21/20). A deeply oversold rally is now approaching key initial resistance at 125 (50-day ma) and then to 133.5-134.5 (2009 downtrend channel, 4/9/20 high and 38.2% retracement from Jan-Apr 2020 decline). The key initial support is 118.5-121 and then 106-107. WTI Crude Oil is also nearing key initial resistance at 29.5-30 (38.2% retracement from Jan-Apr 2020 decline). Key initial support rises to 24.5-26, and below this to 21.5-23.5. Gold continues to consolidate its recent gains. This consolidation can lead to the resumption of its bull trends and next targets to 1,793-1,798 and then to 1,924-1,958. Key initial support rises to 1,666-1,704.
Currencies – As the extreme volatilities in the financial markets subsided currencies have returned to more normal levels as represented by their prevailing trading ranges. USD returns to its 2-year uptrend channel between 97-97.5 and 101-101.5. A 2-month triangle also exists between 99.32-98.82 and 101. EURUSD also returns to its 2-year downtrend channel between 1.06-1.07 and 1.11-1.12. A 2-month triangle is also developing between 1.0727-1.0771 and 1.1017-1.1146. A golden cross buy signal in JPYUSD hints of a retest of key initial resistance at 0.943-0.9471.
S&P 500 Sectors – 6 S&P 500 sectors are currently residing within the Leading and Improving Quadrants. This is technically constructive as this suggests half of the S&P 500 sectors are favorable. Technology (XLK) and Communication Services (XLV) are regaining their leadership roles within the Leading Quadrant. Materials (XLB) and Consumer Discretionary (XLY) continue to improve within the Improving Quadrant with XLY close to moving into the Leading Quadrant. Industrial (XLI) and Real Estate (XLRE) continue to weaken within the Lagging Quadrant. Energy (XLE) and Financials (XLF) are starting to show initial technical signs of recovering (oversold rallies) within the Lagging Quadrant.
To read the entire weekly technical report click the link below: