The Start of Something Bigger?
After holding above important support levels, the major U.S. indexes have rebounded to retake their 10-week moving averages. Retaking the 40-week moving averages would be a sign that the bulls are recapturing control of the trends. The rebound in equities plays out as treasuries remain under pressure and commodities stall in their uptrend for a second consecutive week. Finally, we highlight a potentially important development in the breadth dynamics for the NASDAQ 100 Index.
NASDAQ 100 Breadth
Before moving into the key macro trends for the week, we wanted to highlight an interesting development for the NASDAQ 100 Index. Over the past four days, the upside breadth, measured as Advancers divided by Advancers + Decliners, has been over 80%. This metric’s three-day moving average (black line) crossed above the 80% threshold on March 17th.
Since 2000, there have been 54 other instances of the three-day moving average crossing above 80%. Over the next 21-days of trading, the NASDAQ 100 has been higher 74.07% of the time The median return has been 2.19% (baseline stats during the same time are 61.62% and 1.46%). The maximum return of 14.76% came as the index was emerging from the lows of the global financial crisis. The lowest 21-day return following this signal was -13.24%, which took place in the month following December 23, 2021.
While we can never say that the NASDAQ is guaranteed to match these prior statistics, we can say that a breadth reading such as this is a nice starting point if a new bullish trend is beginning.
U.S. Equities
The S&P 500 staged a strong rally from support near 4,200 last week. The index added more than 1% in four consecutive sessions to break above the 4,400 level and the declining 10-week moving average. The rally alleviates some of the bearish pressure that has been building and puts the index in a neutral position. The 40-week moving average and price-based resistance reside near 4,500. Above these levels, the bulls are back in control of the trend.
The 14-week RSI has retaken the 40 level after briefly undercutting it in the prior week.
The S&P Small Cap 600 was also higher on the week and has retaken the 10-week moving average while holding below the 40-week moving average. Support remains near 1,220; retaking the 40-week moving average would put the bulls in control of the trend. The 14-week RSI is moving higher from the 40 level, keeping momentum in favor of the bulls.
Relative to the S&P 500, Small Caps are holding above support despite lagging last week. Pushing through the peaks from October and November could set the stage for continued outperformance.
The NASDAQ 100 Index was not left out of last week’s equity rally, having pushed through 14,000 and the 10-week moving average. The index must still contend with the 40-week moving average before we make the case that the bulls are in control of the trend. Perhaps the breadth dynamic mentioned above will be a catalyst? The 14-week RSI has also staged a rebound to retake the 40-level.
The relative trend caught a bullish reprieve last week and is now testing the underside of broken support. This is a step in the right direction, but support must be reclaimed before we can begin to think of making the bullish case.
U.S. Fixed Income
The 10-Year Note has made a decisive break below the $128 level and has moved further below the declining 10 and 40-week moving averages. The bears are not ready to give up control yet.
The yield has gapped higher to extend its move above the 2% level.
Rates have continued to move higher across the curve. The most dramatic of these moves continue to be at the front end, leading to a continued flattening of the curve across timeframes.
Global Equities
Like its U.S. peers, the Global Dow has held important support and staged a rally last week. Unlike equities in the U.S., the Global Dow has not recaptured its 10-week moving average and remains below the 40-week moving average. Bulls will note that the 14-week RSI is holding above 40, but breaking moving averages is needed to say that they are in control of the trend.
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.
Commodities
The Bloomberg Commodity Index was under pressure for a second consecutive week after fading from the 140-150 resistance zone that we highlighted on March 7th. The trend remains bullish, with price above the rising 10 and 40-week moving averages. However, the 14-week RSI is still in an overbought condition.
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