The Bears Increase
the Pressure

The bears remain in control of the trends in the U.S. equity markets as another week begins. The S&P 500 has lost ground in nine of the past 10 weeks, creating an environment where investors who must maintain equity exposure will have to continue to find what is “less bad.” Once again, that mantra leads to Small Caps, Global Equities, and Commodities. The traditional hedge/haven, treasuries, remains anything but.

U.S. Equities

The S&P 500 has now closed lower in the 9 of the past 10 weeks. Last week saw a rejection at the declining 10-week moving average, which is below the declining 40-week moving average. Momentum is in a bearish regime, confirming the price action. The bears remain in control of the trend, and there are increased prospects that the 3,400 – 3,500 zone will be tested.

The S&P Small Cap 600 was certainly not immune to the selling pressure that gripped markets last week. The index closed lower after failing to hold above the declining 10-week moving average. This drama plays out below the declining 40-week moving average. The 14-week RSI has moved back below the 40-level as the indicator shifts to a bearish regime.

While there is no doubt that the price trend is bearish, we continue to note that it has been less bearish than the S&P 500. The relative ratio is moving higher with eyes for the October/November peaks. Breaking that mark sets the stage for further outperformance.

The NASDAQ 100 Index maintains its bearish trend, below resistance and the declining 10 and 40-week moving averages. Momentum confirms the bearish trend, with the 14-week RSI continuing to make lower highs as it moves into a bearish regime.

The relative trend also remains bearish as the ratio trades below broken support and has been making lower highs since the November peak.

U.S. Fixed Income

The 10-Year Note remains under pressure, breaking below the 2018 lows after failing at the declining 10-week moving average, which is well below the 40-week moving average. The traditional haven asset in most portfolios continues to be anything but.

The yield is knocking on the door of a breakout in the near term.

Rates continue to move higher across the curve. The short-end is breaking to new highs, and the long-end is on the verge of doing the same. Carnage in the treasury market is not contained to the 10-Year but is a theme across the space.

Last week we highlighted the importance of the $104 level for the iShares Core U.S. Aggregate Bond ETF (AGG). Below this mark and the moving averages, the bears are in control. Momentum confirms the trend as the 14-week RSI sits in an oversold condition.

Global Equities

Despite weakness last week, the Global Dow is holding above support at 3,600 while trading below the 10 and 40-week moving averages. Should 3,600 give way, the pre-COVID highs are likely in play. The 14-week RSI is breaking below 40, a bearish datapoint for the price trend.    

The relative trend remains below resistance, but a breakout is still a threat. Should one take place, the stage could be set for further outperformance.

Commodities

The Bloomberg Commodity Index remains in an uptrend, above the rising 10 and 40-week moving averages. A break above the 140 level could be a signal that the next leg of the bullish cycle is beginning.

The 14-week RSI is in an overbought position, confirming the bullish price action.

Across the commodity landscape, not much has changed week/week. Energy remains clear leadership. Agriculture continues to consolidate below resistance. Metals are still under pressure.

U.S. Dollar

The Dollar has reclaimed the $103 level, a feather in the cap of the bulls. Strength is likely a flight to safety as other havens have failed to keep the storm at bay.