Key Points
- New Lows Are on the Rise
- U.S. Equities Continue to Stall, But NASDAQ Makes a New High
- 10-Year Yield Won’t Go Down Without a Fight
- Commodity Pullback Led by Energy
- Dollar Follows-Through to the Upside
Chart in Focus
Equities remain in a consolidation, one that we have described as “a pause that refreshes” before a continuation of the bullish trend. However, we try to be mindful of what could change our prevailing view. Right now, that would be a continued build in new lows that leads to a break of the consolidation to the downside. Looking at the S&P 1500, we can see the consolidation in price. We can also see that last week, the percentage of stocks on the NYSE making new 52-week lows surpassed levels seen at the September trough. The NYSE six-month lows have also been moving higher over the past week. For the S&P 1500, these metrics are also becoming elevated. This is the elephant in the room now.
U.S. Equities
The S&P 500 stalled for a second consecutive week, just below record levels. The index remains above the rising 10 and 40-week moving averages, with the latter in line with important price-based support near the 4,300 level. Short-term support is near 4,500. Above these key levels, the benefit of the doubt remains with the bulls.
The 14-week RSI is holding in an overbought condition, lending momentum confirmation to the bullish price trend.
After breaking to new highs, the S&P Small Cap 600 has also stalled over the past two weeks. The index is pulling back for a potential retest of the breakout level near 1,400. Bulls will argue that if this level holds, odds favor a continuation to the upside. Bears will point out that the breakout was not confirmed by momentum as the 14-week RSI did not become overbought and failed to make a higher high with the price. With the index also above the 10 and 40-week moving averages, the bulls remain in control of the ball but the line in the sand is clear.
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 one sector finished higher on the week. Energy was the worst performer for a second consecutive week.
- Utilities – Testing resistance after a strong move higher, the only group to close higher on the week.
- Discretionary – Fighting to hold the short-term breakout level.
- Technology – Pausing above support after a strong move higher.
- Energy – Fading fast from a failed breakout.
The NASDAQ Composite Index bucked the stalling trend last week to close at yet another record weekly high. The key levels to watch are 15,300 (short-term) and 14,100 (longer-term). Above these metrics and the rising moving averages, the trend remains bullish. Price strength is confirmed by momentum, with the RSI in a bullish regime and at overbought levels.
Relative to the S&P 500, the NASDAQ Composite is moving higher from short-term support, keeping the February highs in play.
U.S. Fixed Income
The 10-Year Note is not going down without a fight as it wrestles with the key support level that we have been highlighting. The declining 10-week moving average continues to act as resistance to rallies, and the price remains below the declining 40-week moving average. For now, we are content to let the battle play out as we look for a decisive break in either direction.
The 14-week RSI remains tilted in favor of the bears, but we do note the higher low.
The yield has resistance at the 1.75% level.
Rates remained elevated across the curve despite a pullback last week. As we noted last week, moves to the upside have been more pronounced in the short end of the curve.
Global Equities
The Global Dow has weakened further over the past week, pulling back to test the 10-week moving average after failing to make a decisive break to new highs. It is hard to make a bullish momentum case, as the 14-week RSI has not been able to become overbought and is now moving to the downside.
The real story remains in the relative trend, which is moving to new lows.
Commodities
The Bloomberg Commodity Index continues to consolidate below the recent highs. The rising 10-week moving average held as support once again last week, and price-based support near 98 remains in place. The recent high was not confirmed by the 14-week RSI, which has left overbought conditions. The benefit of the doubt remains with the bulls if the price is above 98.
The relative trend is holding below the breakout level. Until this level is retaken, October’s strength will continue to be viewed as a false breakout.
Under the surface of the commodity market, Energy remains the weakest link in the short term and explains much of the stalling activity in the index.
- Precious Metals – Holding above the breakout level, upside to 2,550.
- Industrial Metals – Under the rising trend line, below 460, the bears take the ball.
- Agriculture – Grinding higher, the May highs are in play.
- Energy – Below support at 270, room to 250 on the downside.
The Dollar
The U.S. Dollar is following through after breaking above resistance at the 94.50 level. The 10-week moving average has done a good job of defining the trend and should act as support to near-term pullbacks. Strength is confirmed by momentum, with the 14-week RSI overbought after making a series of higher lows.
Take-Aways:
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