Key Points

  • The S&P 500 Avoids a Fourth Consecutive Losing Week
  • Small Caps Hold Support but Continue to Lag
  • The NASDAQ Composite’s Relative Trend Worsens
  • Ten-Year Note Holds Support Despite a “Hawkish” Fed
  • Global Dow Remains Above the Moving Averages

U.S. Equities

The S&P 500 narrowly avoided closing lower for a fourth consecutive week with a rally on Friday that took the index back to the underside of the 40-week moving average. However, the index remains below the declining 10-week moving average. Last week’s low provides a support level near 4,220 that can be used to manage risk should it be broken. For equity bulls, retaking the 40-week moving average would be a good start in repairing some of the technical damage that has been done. Closing above 4,550 would then be the next key development.

The 14-week RSI is fighting to hold the 40 level to remain in a bullish regime after making a negative divergence when the index traded to new highs at the end of 2021. Bulls want to see the recent downtrend reversed.

The S&P Small Cap 600 closed lower last week but managed to move off its lowest levels to close in line with the level where the week opened. The index is below the 10 and 40-week moving averages, with the former crossing below the latter. Here too, last week’s low provides a key reference point for risk management purposes. However, bulls want to see a close back above the moving averages. The 14-week RSI remains below broken support.

The relative trend continues to fade from resistance.

The NASDAQ Composite Index also closed the week to the downside despite a late rally on Friday. The index is below the 10 and 40-week moving averages and price-based support near 14,300. At the same time, the 14-week RSI is below the 40 level, which marks the lower bound of a bullish regime.

The relative trend continues to favor the bears, moving lower once again last week to remain below broken support.

U.S. Fixed Income

The 10-Year Note is fighting to hold the new support level that was established in the prior week, near $128, as it continues to trade below the declining 10 and 40-week moving averages. The 14-week RSI has made a higher low, leaving a bullish divergence in place that would be confirmed with a move back above the moving averages.

Thus far, the yield is holding above broken resistance at the 1.75% level. This remains a key level to watch as price tests support.

Global Stocks

The Global Dow closed near the breakout level last week despite a rebound from below the 40-week moving average. The index also managed to close above the 10-week moving average, to keep the bulls in control for now. The 14-week RSI moved lower after failing to become overbought when the index made a new during the week that ended on January 14th but remains in a bullish regime.  

Relative to the S&P 500, the improvements that we have noted over the past few weeks remain compelling, but we want to see a break of resistance at the May and June 2021 highs to solidify a change in the trend.

Take-Aways:

Equities in the U.S. staged a late rebound on Friday, which held the S&P 500 while avoiding a fourth consecutive week of losses. Bullish investors now want to see key moving averages retaken as a sign that the technical picture is improving. Last week’s lows provided an important reference point for investors as they can use it to manage risk should selling pressure push the indexes below those levels. Perhaps the most intriguing development last week was that the 10-Year Note continued to hold support despite comments from the Federal Reserve that were taken to be more “hawkish” than expected.

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