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Take-Aways:

While you may not know it based on Friday’s close, the major U.S. averages were higher last week. While all remain below their respective 10 and 40-week moving averages, there is scope for a countertrend rally in the near term. Specifically, we highlight bullish divergences on the 14-week RSIs as a signal that the downside momentum may be waning in the short term. While we are open to the idea of a rally, we note that the moving averages must be broken to the upside before a more compelling bull case can be made. Treasuries remain under pressure while commodities have held support to keep their secular uptrend alive.

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U.S. Equities

The S&P 500 closed higher on the week, though you might not realize that based on Friday’s trading. The index remains below the declining 10 and 40-week moving averages and the June lows. However, the 14-week RSI did not become oversold during the past two weeks and has made a higher low relative to June. There sets up the potential for a countertrend rally toward 3,900 in the near term.

The S&P Small Cap 600 Index closed higher on the week but remained below the declining 10 and 40-week moving averages. Here too, the 14-week RSI has left a higher low on the chart after failing to become oversold during the past two weeks. There is scope for a near term rally toward the 1,200 level.

The relative trend continues to move sideways, trading in a near-year-old consolidation. 

The NASDAQ 100 Index is testing a key support level below the declining 10 and 40-week moving averages. The 14-week RSI has made a higher low, making it three-for-three for the major U.S. averages leaving a bullish divergence on the charts. A run toward 13,000 can not be ruled out in the near term.

The relative trend continues to trade below resistance and is heading lower. Odds favor continued underperformance.

U.S. Fixed Income

The 10-Year Note closed lower once again last week, continuing a striking that has been in place since key support at the 2018 lows was broken. The Note is trading below the declining 10 and 40-week moving averages to keep the bears in control of the match.

The yield remains above support at the 3.20% level, increasing the odds of a move toward 4.00%.

Global Equities

The Global Dow did not sit out the rally in equities last week, but it remains below support and the declining 10 and 40-week moving averages. The 14-week RSI was holding in a bearish regime and did reach oversold levels during the recent move lower over the past month.  

The relative trend remains under pressure, near the late 2021 lows. There may be a base building, but more time is needed for a transition to take hold.

Commodities

The Bloomberg Commodity Index has rallied from the key support zone between 106 and 110, below the 10 and 40-week moving averages. Clearing the moving averages in the weeks ahead would be a sign that the secular uptrend is reasserting itself.

Momentum has also held a key level. The 14-week RSI is moving higher from 40, indicating that the bulls are still fighting hard.

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