Nice Moves, but Not
Nice Enough

Price action in the major equity indexes saw many countertrend bounces and tests of resistance over the past week. However, until the 10-week moving averages and momentum can materially break out to the upside, the rallies have not provided enough evidence for a change of trend. While rates have pulled back across the curve over the past week, the 2018 lows have yet to be cleared to the upside for the 10-year note. The sellers have found the Commodity space and are taking no prisoners, but there is room for long-term levels before the uptrend is jeopardized.

S&P 500

Last week’s trading action saw a countertrend rally in the S&P 500, moving up to test the 3,900 zone from below declining 10 and 40-week moving averages. Bulls will note that RSI has yet to become oversold on the weekly timeframe, while bears will note that the downtrend and bearish regime in the indicator remain in play.

The NASDAQ 100 has set the stage for an attack from below at long-term resistance at 12,200 and the declining 10-week moving average. Note that price struggled around this area in May and June and found resistance at the 10-week moving average. RSI remains in a bearish regime despite the recent countertrend move, unable to break out to the upside. Relative to the S&P 500, the group continues to falter below overhead relative resistance at the highlighted zone.

Small Caps appear to be rangebound below 1,190 resistance and 1,090 support, key levels for investors to watch in the coming weeks. The price action plays out much like the larger indices, below declining 10 and 40-week moving averages and stuck in a bearish momentum regime. Relative to the S&P 500, the group remains an in-line performer at best, stuck below relative resistance but not breaking down either.

Last week’s price action saw the 10-year note trade up through the 2018 lows toward the top end of the trading range but was unable to close above this zone. Conversely, the yield traded above the 3.25% level but ultimately closed below. While the sheer distance from the 10-year note’s price and the 40-week moving average has left the door open for strong countertrend rallies, investors would be prudent to wait for confirmation that these long-term zones have been cleared before making the call that the trend in bonds has reversed to the upside.

Across the curve, rates have pulled back to test support levels, most noticeably on the long end in the 20s and 30s. Until these levels can show signs of weakness, the uptrend in rates across the curve appears to remain intact.

While the 10-year note and yield are at important levels, the iShares Core U.S. Aggregate Bond ETF (AGG) has yet to stage an attack on the $104 level that we have been calling out in our notes over the past several weeks. RSI remains in a downtrend coming out of oversold conditions. Until the $104 level and the 10-week moving average is cleared to the upside, the bias remains with the bears in the space.

Global Equities

Global stocks have found long-term support at the 3,500 zone but remain below long-term resistance at 3,600, below the declining 10 and 40-week moving averages. RSI remains stuck in a bearish regime and below the declining trendline. Relative to the S&P 500, it was another week of underperformance for the Global Dow, faltering below relative resistance at the highlighted zone.

Commodities

Commodities have pulled back to test long-term support at the February highs and the 119-120 zone below a now-declining 10-week moving average. Below this level, the 40-week moving average comes into play as the next potential support zone. Note that similar price action developed in Q4 of last year, with the index resolving to the upside. Weekly RSI continues to decline from the heavily overbought readings printed in March but remains above the highlighted lower bound that has defined the uptrend in the space since Q4 of 2020.

Within the Commodity complex, downside moves best describe the price action that’s been in play over the past week. Note that Industrial Metals and Agriculture have received the brunt of the selling pressure, while Precious Metals continue to falter, and Energy has broken down from long-term support.

U.S. Dollar

The U.S. Dollar Index has continued to print values above the long-term breakout zone at the $103 level on continued strength. RSI remains in an uptrend, defined by a series of higher highs and higher lows. Until these levels are broken to the downside, the bias remains with the bulls for the greenback.