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U.S. equities staged impressive rallies to close near the top of their weekly ranges, setting the stage for potential follow-through this week. Should that unfold, the door is open for a run to declining 40-week moving averages. Commodores are at an inflection point as key parts of the market are trading at important support levels. Treasuries are biassing as the broader bond market has more work to do. The dollar is likely a key driver for risk assets in the near term.

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U.S. Equities

The S&P 500 closed lower on the week but managed to finish near the top of the range, rebounding from an earlier selloff. The index remains below resistance at the 3,900 level and the declining 10-week moving average. Breaking these levels to the upside set the stage for a countertrend move toward the declining 40-week moving average. The 14-week RSI is holding in a bearish regime for now.

The S&P Small Cap 600 Index remains below resistance defined by the lower bound of the 2021 consolidation zone. The index is below the declining 10 and 40-week moving averages, and the 14-week RSI is holding in a bearish regime. Like the S&P 500, early weakness last week was reversed as the index closed near the top of the range.

The relative trend continues to stall below the key resistance points at the October/November highs. The group has gone from being “less bad’ than the S&P 500 to perform in line with the major U.S. average.

The NASDAQ 100 is testing broken support and the declining 10-week moving average, once again setting the stage for this week to be a key inflection point. Strength from here puts the declining 40-week moving average into play on the upside. The 14-week RSI has turned higher but remains in a bearish regime. Finally, we can add the NASDAQ to the list for closing at the top of the weekly range.

The relative trend remains bearish as the ratio trades below broken support; however, there are some early signs of stabilization that have caught our attention.

U.S. Fixed Income

The 10-Year Note is proving resilient as it begins to build a base near the 2018 lows. The Note closed above the 10-week moving average, which is in the early days of shifting from declining to flat. The 40-week moving average still reflects a bearish trend.

The yield is wrestling with resistance near 3.20%. It is notable that a stronger-than-expected CPI report last week, did not cause a breakout in the yield.

Across the curve, the trend in rates remains bullish, but we can see that the long-end has come in more than the short-end, leading to inversions.

A broader look at the fixed income space points to more work needing to be done. The iShares Core U.S. Aggregate Bond ETF (AGG) is holding below the key $104 levels and is well below the 40-week moving average as it wrestles with the 10-week moving average.

Global Equities

The Global Dow is below the key 3,600 level and the declining 10 and 40-week moving averages. This bearish price structure is confirmed by momentum as the 14-week RSI trades near oversold levels.    

The relative trend remains below resistance and is moving lower.

Commodities

The Bloomberg Commodity Index was lower for a fifth consecutive week last week as it does battle with the rising 40-week moving average. The index remains below the declining 10-week moving average but above price-based support. This is all a long way of saying that the short-term trend is bearish, but the long-term trend is still bullish. For those with a longer timeframe, the bulls keep the ball above 106.

The 14-week RSI is holding in a bullish regime, testing the 40-level.

Drilling down at the different pockets of the commodity market, we can see that both groups of metals have reached long-term support levels while Agriculture has traded to a key shorter-term level. Energy remains in consolidation within an uptrend.

U.S. Dollar

The U.S. Dollar Index has continued to trade above the breakout zone at the $103 level and is likely the key for risk assets, especially commodities, in the near term. A pullback in the greenback would likely be a bullish tailwind for equities and commodities this week. However, unless 103 is broken, risk rallies are likely countertrend in nature.

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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.