- S&P 500 Closes at a Weekly High
- Odds Favor a Small Cap Breakout
- Rates Continue to Move Higher; 10-Year Note Breaks Support
- Commodities Take a Rest but The Bulls Are in Control
- Dollar Can’t Breakout, Now Moving Lower
The S&P 500 made a new, weekly, closing high on Friday as the index continues to build on the rebound from the September pullback. The 10-week moving average is initial support, near 4,450. Stronger support is at the 4,200 level, which lines up with the rising 40-week moving average.
The 14-week RSI remains in a bullish regime, keeping momentum with the uptrend in price.
The S&P Small Cap 600 remains above the 10 and 40-week moving averages and is now pushing to the top of the consolidation zone that has been in place since March. We continue to give an edge to the bulls (as we wrote last week), with the 14-week RSI breaking the downtrend from then March highs. We also note that this indicator remained in a bullish regime during the current seven-month consolidation.
On a relative basis, Small Caps are holding the break of the downtrend line and remain above support despite underperforming the S&P 500 again last week.
Leading the charge within the Small Cap universe last week were:
- Financials – Attacking the highs; breakout likely.
- Discretionary – Trapped in a consolidation that should resolve soon.
- Energy – New highs as strength continues across the group.
- Utilities – Sloppy consolidation but holding support.
The NASDAQ Composite Index has regained the 10-week moving average two weeks after holding support at the rising 40-week moving average. As we wrote last week, this opens the door to the NASDAQ Composite joining the S&P 500 in trading to record highs. The 14-week RSI is holding in a bullish regime, strengthening the case for record highs to be reached.
Relative to the S&P 500, the NASDAQ Composite is holding above support but continues to struggle making upside progress. For now, we see the group as an in-line performer.
U.S. Fixed Income
The 10-Year Note has broken through support, confirming our view that as long as price is below the 10 and 40-week moving averages, bond-bears are in control and the trend to the downside is likely to persist. It would not be surprising to see the $127 level tested
The 14-week RSI has moved into oversold territory, confirming that momentum is to the downside for price.
Last week saw rates move higher across the curve, with the short-end continuing their powerful advance, while the long-end rebounds from support. The path of least resistance remains to the upside for rates.
The Bloomberg Commodity Index took a pause last week, after raising for five consecutive weeks. The index remains in a textbook uptrend, above the rising 10-week moving average. Momentum is with the price trend as the 14-week RSI is currently overbought. Pullbacks to the 97 – 100 range are an opportunity for commodity bulls.
Relative to the S&P 500, Commodities are holding the breakout. Odds support an attack on the March 2020 highs.
Under the surface of the commodity market:
- Precious Metals – Signs of life as the downtrend line is in the process of being broken.
- Industrial Metals – Taking a rest after a fast sprint to new highs, the uptrend is intact.
- Agriculture – Another breakout attempt in process.
- Energy – New highs, remains leadership.
The Global Dow closed higher for a third consecutive week but was not able to move to a new high. As with the Small Caps in the U.S., we are giving the edge to the bulls with the index above the 10-week moving average. At the same time, the 14-week RSI is breaking the downtrend as it holds in a bullish regime.
On a relative basis, the Global Dow remains below resistance. Until this level is overcome, it is hard to make the case that global stocks will lead their peers in the U.S. and our views here are unchanged.
The U.S. Dollar Index remains below resistance as the bears hold the line at 94.50. The 10-week moving average should provide support for the bulls, but if it is broken, there is room down to 91.50. The 14-week RSI has been making higher lows, but we note that it has not been able to shift to a bullish a regime. Until 94.50 is broken with a momentum confirmation, the trend is neutral.