Major equity indexes have rallied from support and are testing key resistance levels above their 10-week moving averages. The price action in the ten-year note has been encouraging for bond bulls, but the AGG ETF faces a key test at the $104 level. Commodities resume their uptrend as both the Bloomberg Commodity Index and its major components rally from long-term support levels as the Dollar pares back recent gains.
After a noteworthy rally from the 10-week moving average and the 3,900-zone last week, the S&P 500 is testing resistance at the Q1 lows around 4,100. Should the index break out to the upside, an attack on the declining 40-week moving average could be in play. Note that RSI is testing the upper bound of a bearish regime at the 50 level, a zone that equity bulls want to see recaptured to the upside in the coming weeks.
Small Caps have not been left out of last week’s equity rally as the S&P 600 sets up to test long-term resistance at 1,220 above a rising 10-week moving average. Here too, the declining 40-week moving average (note resistance at the indicator in Q1) comes into play should the group break out to the upside. Relative to the S&P 500, the group remains an in-line performer—refusing to break down and refusing to break out.
The NASDAQ 100 continues to trade above the 10-week moving average and is testing the 13,000-resistance zone at the Q1 lows after rallying from 12,000 support that we highlighted in our note last week. RSI is heading to test the upper bound of a bearish regime at the 55 level, a zone that the bulls are watching closely. Relative to the S&P 500, the group continues to falter under relative resistance at the highlighted zone.
U.S. Fixed Income
10-Year Treasury prices continued to rally above the 2018 lows and the rising 10-week moving average in last week’s trading session. Likewise, yields continued to falter below the 2018 highs and the 3.20% zone, a key level for the bond bears.
Across the curve, rates have moved down to test long-term support zones at the Q2 lows as the upside pressure in yields appears to be decreasing. Bond bulls want to see these zones broken to the downside to have confidence that the recent upside move could continue, while the bears are looking for a resumption of the uptrends.
In light of the recent upside boost in bond prices, the iShares Core U.S. Aggregate Bond ETF (AGG) is testing key resistance at the $104 level (2011 and 2018 lows). Should resistance give way to the upside, the bullish case for bonds becomes strengthened. Note that RSI has yet to break out of the upper bound of the bearish regime that has defined the downtrend in the fund since late last year, an additional zone that bond bulls want to see cleared to the upside.
The Global Dow has closed above the 10-week moving average for the first time since late March of this year on the recent bout of strength. There is room to run to 3,700 resistance as momentum breaks out of the downtrend line to the upside. Relative to the S&P 500, the space continues to underperform as the ratio declines as investors’ preference for domestic equities continues.
The uptrend for commodities resumed over the past week as the Bloomberg Commodity Index rallied from the rising 40-week moving average. As the group sets the stage for an attack on the 10-week moving average from below, RSI has recovered up through the Q4 lows of last year, reversing course to the upside. The bias remains to the upside, so long as price is above the 106 zone.
Across the commodity landscape, the price action can best be described as rallies from important support levels. Agriculture slices to the upside through prior broken support as industrial and precious metals hold key long-term levels. Energy rallied from the lows in Q1 of this year.
The U.S. Dollar Index retreated to the June highs at the $105.75 level in last week’s trading session as the greenback continues to digest the recent strength. Long-term support lines up at the 103 level (March 2020 highs), with the bias to the upside so long as the dollar is above this zone. RSI is cooling off from overbought conditions but remains well above the 55 zone that has defined the uptrend.
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