Key Points

  • S&P 500 and NASDAQ Composite Trade to Records
  • Small Caps Finally Breakout to Join the Party
  • Strength is Not Isolated to the U.S.; Global Dow Breaks Out
  • Commodities Pause
  • For Now, We Are Content to Watch the Flattening Yield Curve

U.S. Equities

The S&P 500 closed higher for a fifth consecutive week and finished at another record high. We continue to see initial support at the 10-week moving average, near 4,500, which also lines up with the breakout level. Below that, the 200-day moving average is nearing the important 4,300 price point that we have been highlighting for weeks.

The 14-week RSI has moved into an overbought condition, lending a momentum confirmation to the bullish price trend for the index.

In what may have been the most-watched event in trading all year, the S&P Small Cap 600 Index finally broke up and out of the consolidation that had been in place since March. This event is in line with our thinking as we had been giving an edge to the bulls as the 14-week RSI remained in a bullish regime. Support on pullbacks is in the 1,350 – 1,400 zone that lines up with the 10 and 40-week moving averages and the breakout level.

On a relative basis, Small Caps are moving higher after holding the break of the downtrend line and remain above support. 

All sectors within the S&P 600 closed higher on the week. The four best performers were:

  • Industrials – Breakout, bullish above 1,600.
  • Technology – Breakout, bullish above 1,300.
  • Discretionary – Eyes for the highs, room to 1,150.
  • Telecommunication Services – Breakout, bullish above 4.60.

The NASDAQ Composite Index also closed at a record level above the rising 10 and 40-week moving averages, both of which line up with important price-based support levels. Momentum confirms the bullish trend, as the 14-week RSI is now overbought.

Relative to the S&P 500, the NASDAQ Composite is moving higher above support, the February highs are in play.

U.S. Fixed Income

Last week we wrote, “While it would not be surprising to see an oversold bounce from current levels, the benefit of the doubt is with the treasury bears for now.” The bounce from support has now taken place, and the 10-Year Note istesting the declining 10-week moving average, below the declining 40-week moving average. Until these levels are broken, the trend remains to the downside.

The 14-week RSI confirms this view as it remains in a bearish regime.

Across the curve, rates moved lower on the week. The move to the downside was more pronounced at the front-end, but we should not ignore the fact that the 20/30 spread is flat. It appears that there is more room to fall for short-term rates, which could lead to further flattening.


The Bloomberg Commodity Index closed lower for a third consecutive week but is holding near its recent highs. The index remains above the rising 10-week moving average and the bullish trend line from the 2020 lows. The 14-week RSI has left overbought conditions after failing to make a higher high with price. Above the 10-week moving average, the commodity bulls keep the ball, but we are now watching this level closely.

Relative to the S&P 500, Commodities has lost the breakout level, setting the stage for a potential false move. Bulls want to see this level quickly retaken.

Under the surface of the commodity market, the drivers of the recent weakness are Industrial Metals and Energy:

  • Precious Metals – Finally breaking from the consolidation, above 2,410 the trend has reversed.
  • Industrial Metals – Breaking the rising trend line, below 460 the bears take the ball.
  • Agriculture – Breakout intact, 430 is support.
  • Energy – Pausing for a second week after a strong run, support at 270.

Global Equities

The Global Dow joins the major U.S. markets trading at record levels, as it breaks from the consolidation that has been in place since May. The index is above the rising 10-week moving average, which is likely to act as support to near-term pullbacks. The 14-week RSI continues to move higher, and we now want to see a stronger confirmation in the form of an overbought reading. 

On a relative basis, the Global Dow remains below resistance and is moving toward the lows of the year. U.S. investors with a home country bias continue to be rewarded, a trend that is not likely to change until resistance is overcome. This view is unchanged on the week.

The Dollar

The U.S. Dollar is trying to break resistance after finding support at the rising 10-week moving average. We continue to give an edge to dollar bulls as the 14-week RSI shifts to a bullish regime after making higher lows.


Our “melt-up” scenario continues to play out, and we find it hard to be bearish on equities when the S&P 500, NASDAQ Composite, and S&P 600 are trading at record levels. At the same time, equity strength is confirmed by the breakout in the Global Dow. If investors wanted to find a new near case, they could investigate the flattening yield curve. While this is on our radar, we will simply note it and move on until its bearish implications are seen in the markets’ trends.

Disclosure: This information is prepared for general information only and should not be considered as individual investment advice nor as a solicitation to buy or offer to sell any securities. This material does not constitute any representation as to the suitability or appropriateness of any investment advisory program or security. Please visit our FULL DISCLOSURE page.