Key Points
- The S&P 500 Tests Support as Momentum Breaks Down
- Small Caps Remain Leadership, Meaning They Are “Less Bad”
- The NASDAQ Composite Continues to Underperform
- Ten Year Note Fades Below the 10-Week Moving Average
- Global Dow Dances with Key Support
U.S. Equities
The S&P 500 closed lower for a second consecutive week and is once again testing the key support zone in the 4,200 – 4,300 zone. The index remains below the 10 and 40-week moving averages and resistance at the 4,550 level. Breaking support would put the bears in control of the trend.
The 14-week RSI is in the process of breaking below 40, which is the lower bound of a bullish regime, for the first time since the depths of the pandemic selloff. It is safe to say that bullish momentum has been eradicated.
The S&P Small Cap 600 was also lower on the week as the index remains below the declining 10 and 40-week moving averages. Support near 1,210 continues to hold, keeping Small Caps in the range that has been in place for a year. The 14-week RSI is holding above the 40 level.
Relative to the S&P 500, Small Caps moved further above near-term resistance. Pushing through the peaks from October and November could set the stage for continued outperformance. It is important to remember that this, in this case, outperforming means “less bad.”
The NASDAQ Composite Index was also under pressure last week, moving toward the important 12,500 support level that we have been highlighting. A break of support would put the bears in clear control of the trend as momentum has shifted to a bearish regime, with the 14-week RSI below the 40 level.
The relative trend continues to move to the downside after breaking key support a few weeks ago. Unlike the absolute trend, the bears are already in control of the relative trend.
U.S. Fixed Income
The 10-Year Note continues to wrestle with the $128 level, moving back below the 10-week moving average while remaining below the 40-week moving average. Last week we highlighted that a move above $130 would put the bulls in control of the trend. Until that time, the bears keep the ball.
The yield has spiked higher once again, toying with the 2% level.
Global Equities
The Global Dow remains below the 10 and 40-week moving averages as it tests support in the 3,800 – 3,900 zone. At the same time, the 14-week RSI is in the process of moving below 40, a sign that momentum may be shifting to a bearish regime.
The relative trend remains below resistance. Until there is a clean break from the current consolidation, it is hard to make a case for outperformance on the part of Global stocks vs. their U.S. peers.
Take-Aways
The picture remains the same for U.S. equities; support levels are being tested but have yet to break. Momentum is beginning to shift in favor of the bears, which would lend confirmation to any support breaks that play out in the weeks ahead. Under the surface, Small Caps continue to outperform (less bad) while the NASDAQ Composite underperforms. The 10-Year Note is under pressure, keeping the bears in control, but we have laid what would need to happen for that to change.
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