Alleviating
Some Bearish Pressure

by | Mar 21, 2022

Key Points

  • The S&P 500 Holds Support, Retakes a Key Moving Average
  • Small Caps Move Higher, Hold Relative Support
  • The NASDAQ 100 Index Stages a Strong Rebound
  • Ten-Year Note Remains Under Pressure
  • Global Dow Lags U.S. Peers

U.S. Equities

The S&P 500 staged a strong rally from support near 4,200 last week. The index added more than 1% in four consecutive sessions to break above the 4,400 level and the declining 10-week moving average. The rally alleviates some of the bearish pressure that has been building and puts the index in a neutral position. The 40-week moving average and price-based resistance reside near 4,500. Above these levels, the bulls are back in control of the trend.

The 14-week RSI has retaken the 40 level after briefly undercutting it in the prior week.

The S&P Small Cap 600 was also higher on the week and has retaken the 10-week moving average while holding below the 40-week moving average. Support remains near 1,220; retaking the 40-week moving average would put the bulls in control of the trend. The 14-week RSI is moving higher from the 40 level, keeping momentum in favor of the bulls.

Relative to the S&P 500, Small Caps are holding above support despite lagging last week. Pushing through the peaks from October and November could set the stage for continued outperformance.

The NASDAQ 100 Index was not left out of last week’s equity rally, having pushed through 14,000 and the 10-week moving average. The index must still contend with the 40-week moving average before we make the case that the bulls are in control of the trend. The 14-week RSI has also staged a rebound to retake the 40-level.

The relative trend caught a bullish reprieve last week and is now testing the underside of broken support. This is a step in the right direction, but support must be reclaimed before we can begin to think of making the bullish case.

U.S. Fixed Income

The 10-Year Note has made a decisive break below the $128 level and has moved further below the declining 10 and 40-week moving averages. The bears are not ready to give up control yet.

The yield has gapped higher to extend its move above the 2% level.

Global Equities

Like its U.S. peers, the Global Dow has held important support and staged a rally last week. Unlike equities in the U.S., the Global Dow has not recaptured its 10-week moving average and remains below the 40-week moving average. Bulls will note that the 14-week RSI is holding above 40, but breaking moving averages is needed to say that they are in control of the trend.

The relative trend remains below resistance. Until there is a clean break from the current consolidation, it is hard to make a case for outperformance on the part of Global stocks vs. their U.S. peers.

Take-Aways

Last week’s rally in equities served to improve their positioning from one where the bears were on the verge of taking control to one that is more neutral. The U.S. indexes have retaken their 10-week moving averages after holding important support levels; moving above their 40-week averages would be a sign that the bulls are taking control of the trend. The 10-Year Note remains in the hands of the bears, weakening further last week.

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