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Take-Aways:

In a note on October 24th, we argued that there was a scope for a year-end rally that could take the S&P 500 to 3,900. The index has broken above that level, an incrementally bullish development that could lead to a test of 4,100 as the next key battle. Small Caps have broken above their 40-week moving average and remain contenders for a leadership position. Even bonds rallied on the week, but there is a lot of damage to repair in the fixed income space. Commodities decided not to join last week’s rally in risk assets and remain in a neutral position.

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U.S. Equities

The S&P 500 has rallied through 3,900 after finding support at the 10-week moving average. This is a win for the bulls and the match could turn further in their favor with a break above the declining 40-week moving average.

The 14-week RSI remains in a bearish regime, but we have noted the higher low in October and the fact that this indicator did not reach oversold levels.

The S&P Small Cap 600 Index has broken above the 40-week moving average and the 10-week moving average is beginning to turn to the upside. The upside bias become incrementally bullish above the 1,300 level. The 14-week RSI is moving higher, and bulls want to see a break of the 60 level.  

The relative trend is still threatening a breakout. A move above the October/November 2021 peaks could set the stage for further outperformance.

The NASDAQ 100 Index closed above the 10-week moving average after holding support at the 11,000 level. The bulls can begin to take control of the match with a move above the 40-week moving average.  

The relative trend remains bearish and below resistance, despite some outperformance last week. Odds favor continued underperformance, a theme that we have been highlighting in these pages for weeks.

U.S. Fixed Income

Even the beleaguered 10-Year Note saw a rally last week which took it to the declining 10-week moving average. There is scope for a move to $114 but the Note remains well below the declining 40-week moving average.

The yield remains above the 3.20% – 3.50% support zone. Nothing changes from a trend perspective until support is broken to the downside.

Global Equities

The Global Dow closed higher on the week, moving to test the 40-week moving average. Note that the 10-week moving average is beginning to turn to the upside. The 14-week moving average is moving toward the upper end of the bullish regime, and we would like to see overbought readings to signal strong upside momentum.

The relative trend continues to work through a potential bottoming process. A break of the trend from March 2021 could set the stage for outperformance.

Commodities

The Bloomberg Commodity Index continues to trade above the 10-week moving average after successfully holding support. The neutral trend would become incrementally bullish with a break above the still-rising 40-week moving average.  It is somewhat discouraging to see the index close slightly lower during a week when risk assets were well bid.

The 14-week RSI is holding above 40, indicating that the bulls retain long-term momentum.

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