Key Points

  • Stocks Take a Breather Across the Board
  • U.S. Over the Rest of the World in Equity Markets
  • Rates Move Higher, Watch the Flattening Curve
  • Commodities Hold Support, but Leadership is Shifting Under the Surface
  • Dollar Breaks above Important Resistance

U.S. Equities

The S&P 500 broke a five-week winning streak but continues to trade near record levels, above the rising 10 and 40-week moving averages. Initial support remains in line with the 10-week moving average near 4,500. Below that, the 40-week moving average lines up with the important 4,300 level. If the price is above these key levels, our year-end melt-up thesis remains in place.

The 14-week RSI remains in an overbought position this week, keeping momentum with the bullish price trend.

After the breakout that everyone was watching, the S&P Small Cap 600 Index took a breather last week. The set-up here is straightforward. Above the breakout level and the moving averages (1,350 – 1,400), the odds favor a continuation higher. Interestingly, the 14-week RSI did not become overbought on the breakout, which is something that we would like to see to increase confidence that it will hold.

On a relative basis, the ratio is holding above the broken downtrend line and short-term support, keeping the benefit of the doubt with the bulls.

Within the S&P 600, only three sectors finished higher on the week. Energy was the worst performer of the week.

  • Materials – On the verge of a breakout, bullish above 710.
  • Industrials – Follows through on the breakout in the previous week, bullish above 1,620.
  • Discretionary – May highs are in play.
  • Energy – Testing support at the prior highs. Must hold to keep the trend in place.

The NASDAQ Composite Index was not immune to last week’s stalling activity in the equity markets, but remains near record levels, above price, and moving average support. The key levels to watch are 15,300 (short-term) and 14,100 (longer-term). Above these metrics, the trend remains bullish, and prices are poised to move higher into the end of the year. Price strength is confirmed by momentum, with the RSI in a bullish regime and near overbought levels.

Relative to the S&P 500, the NASDAQ Composite is testing short-term support. Above this mark, the February highs are in play.

U.S. Fixed Income

The oversold bounce that we had been looking for in the 10-Year Note failed at the declining 10-week moving average, which remains below the declining 40-week moving average. Our view has been, and remains, that below the moving averages, the bears are in control and the path of least resistance is to the downside. As we speak, support is being tested.

The 14-week RSI confirms this view, failing to break from a bearish regime and making lower highs.

Rates have moved higher across the curve this week, and the short end (two’s and five’s) is breaking above recent highs. Further out on the curve, rates remain in their respective consolidations. While it is not a concern in the near term, we are monitoring what a flattening curve could mean for equity prices in the first half of 2022.


The Global Dow also stalled on the week but remains upside-biased above the rising 10-week moving average. However, there is a lack of compelling momentum behind the price action as the 14-week RSI has not been able to reach overbought levels.

The real story is in the relative trend, where U.S. investors continue to be rewarded for maintaining a home country bias.


The Bloomberg Commodity Index managed to avoid closing lower for a fourth consecutive week after rebounding from support at the rising 10-week moving average. As we stated last week, above the moving average, the bulls remain in control, but it is a level that we are watching closely. Below that, 100 is important, especially after the 14-week RSI failed to make a new high with price recently.

The relative trend remains below the breakout level, keeping the prospects of a “false move” in play.

Under the surface of the commodity market, there appears to be a shift taking place as former leaders (Energy and Industrial Metals) stall while Precious Metals and Agriculture follow through on recent breakouts.

  • Precious Metals – Trend reversal in play, upside to 2,550.
  • Industrial Metals – Breaking the rising trend line, below 460 the bears take the ball.
  • Agriculture – Following through to the upside, the May highs are in play.
  • Energy – Breaking first support at 270, room to 250 below this level.

The Dollar

The U.S. Dollar has broken above resistance (now support?) at $94.50 after holding support at the rising 10-week moving average. At the same time, momentum appears to be undergoing a shift to a bullish regime. Becoming overbought would lend a further momentum confirmation to the bullish price action.

Further strength for the dollar could begin to become a headwind for commodities as a group.


Despite some stalling activity across equity markets last week, we remain in the camp of higher prices into the end of the year, unless important support levels are broken. Across asset classes, the breakout in the Dollar has the potential to become a headwind for commodities, especially Energy and Industrial Metals. Precious Metals appear to have woken up to the inflation narrative and may be less impacted by Dollar-strength. In fixed income, we are watching the flattening curve for implications into the new year. 

Disclosure: This information is prepared for general information only and should not be considered as individual investment advice nor as a solicitation to buy or offer to sell any securities. This material does not constitute any representation as to the suitability or appropriateness of any investment advisory program or security. Please visit our FULL DISCLOSURE page.