Key Points
- Record Highs for the S&P 500 and NASDAQ
- Global Stocks are a Bullish Trend but Not Leadership
- Treasuries are in a Range as Bulls Cannot Follow Through
- Commodities Maintain Upside Led by Energy
- The Dollar Retreats After a Strong Rally
U.S. Equities
The back and forth continues, with the S&P 500 rebounding last week to close at record levels once again. The index has regained the 10-week moving average and remains well above the 40-day week moving average. Strength was found in the cyclical sectors of the market, with Energy, Financials, and Industrials leading the charge. Defensive sectors, such as Utilities and Real Estate lagged the broader tape.
Near-term support remains near the 4,100 level. Should that give way, the rising 40-week moving average will likely come into play. Weekly momentum is in a bullish regime, but we note the lack of confirmation at the prior record highs. A break of support would confirm this bearish divergence.
The S&P Small Cap 600 also staged a rebound on the week but failed to trade to record levels, keeping the index in the consolidation that has been playing out since March. Closing above the 10-week moving average is a “win” for Small Cap bulls, and the index remains above the key support levels that we have been highlighting for weeks. As with the S&P 500, the biggest technical red flag is the lower highs on the part of the 14-week RSI. This could be a considered a sign that upside momentum is fading, which would be confirmed with a break of support.
On a relative basis, Small Caps continue to hold support, a break of which would be a signal that they have transitioned to a lagging role within the equity market.
All sectors of the S&P 600 closed higher on the week. The top four were:
- Energy – trading at record highs, remains leadership.
- Telecommunication Services – trading at record highs.
- Consumer Discretionary – consolidating, fading leadership.
- Health Care – trading at record highs, emerging leadership.
The NASDAQ Composite Index closed at a record high last week, remaining above the rising 10-week moving average and support in the 12,400 – 13,000 range. The 14-week RSI remains in a bullish regime but has not yet confirmed price strength.
Relative to the S&P 500, the NASDAQ is moving higher from support and may be reasserting a leadership position.
U.S. Fixed Income
The 10-Year Note continues to move lower, post FOMC, after failing to break resistance at $134. This is a level that we have been highlighting for the past few weeks and the inability to break above it points to the fact that Treasuries are not ready to begin to move higher just yet. On the downside, support is at the $130 level. In between these two price points, we see a lot of opportunity to get chopped up. The Note is below the 50-day moving average, which is flat, while the 14-day RSI is in the middle of the range.
The 30-Year Bond also came under pressure last week after a rally attempt but remains above the rising 50-day moving average. The $163 level that must be overcome on the upside to have confidence that a bullish trend is developing for the long bond. The 14-day RSI is also stuck in the middle of the range.
Global Equities
Global stocks also rebounded last week, with the Global Dow (ex-U.S.) holding support at the rising 10-week moving average. The 14-week RSI continues to make lower highs and has not been able to become overbought since February. For now, key support at the 2018 highs is the level to watch. Above it, the uptrend is intact.
Relative to the S&P 500, the Global Dow continues to build a base, the lower bound of which is now being tested. We continue to see global stocks, as a group, unable to build upside momentum vs. the S&P 500.
Commodities
The Bloomberg Commodity Index also staged a rebound on the week, regaining the rising 10-week moving average and holding support at the 2018 highs. The 14-week RSI remains in a bullish regime. The structure of the long-term uptrend remains in place.
Within the commodity complex, Energy remains the clear standout, extending further to the upside. Industrial Metals continue to rebound from support while Precious Metals stagnate a bit. Agricultural commodities are the clear laggard with no signs of a base-building process beginning.
The U.S. Dollar
The U.S. Dollar Index was not able to build on strength in the previous week, retreating last week, and remains in the consolidation zone that has been in place since January. The index is above the 10-week moving average, a win for the dollar bulls. However, the lack of upside momentum, with the RSI in the middle of the range, is a data point for the dollar bears. It all adds up to a flat trend with support at the 2018 lows and resistance near the 93.50 level.
Take-Aways
Equity trends in the U.S. remain to the upside with the S&P 500 and NASDAQ logging record weekly closes. Global stocks confirm the uptrend, but they are not leadership. While many are looking for higher treasury prices (lower rates), we simply do not see anything more than rangebound trading currently. The commodity trend is bullish, helped by the fact that the dollar cannot seem to build on strength. Energy is the clear leader in the complex.