Equities in the U.S. continue to rally after regaining broken support and their respective 10-week moving averages. These moves, while encouraging, must still pass key tests by reclaiming the declining 40-week moving averages. Moves below the support would be a signal to manage risk as the bears would be regaining control. Treasury curves remain mostly inverted, a conundrum in the face of the strong payrolls report last week. The secular uptrend in commodities remains in place as the key parts of the complex hold support. The dollar is a key datapoint for risk assets.
After regaining broken support and the 10-week moving average, there is scope for the S&P 500 to move up to the declining 40-week moving average. Breaking through that level would set the stage for a continuation of the current rally. However, it would not be a surprise to see the bears put up a fight there. The 14-week RSI is moving higher after breaking the downtrend but still has work to do to exit a bearish regime.
The S&P Small Cap 600 Index continues to rally after breaking above broken support and the 10-week moving average. The index could face a test at the declining 40-week moving average. Breaking above that level would put the bulls in a position to take control of the match. The 14-week RSI has been improving but has yet to break from a bearish regime.
The relative trend continues to churn below resistance as it trades in a consolidation. The group remains an in-line performer for now.
The NASDAQ 100 has room for the declining 40-week moving average after regaining the 10-week moving average and broken support. The 14-week RSI is moving higher as it tries to shift to a bullish regime.
The relative trend continues to improve and is now testing resistance. Breaking higher from current levels could set the stage for further outperformance.
U.S. Fixed Income
The 10-Year Note saw a big reversal to the downside last week but remains above the 2018 lows where it has been building a base for the past two months. The Note is above the 10-week moving average, keeping a move to the 40-week moving average in play.
The yield continues to have a tough time breaking resistance, keeping the odds in favor of a move lower until that level is breached.
Looking across the Treasury market, we can see rates at the short-end of the curve have been stable. Moves lower in rates become more pronounced as investors move further out in time.
The moves in rates highlighted above, which we have been discussing for the past few weeks, have caused three of the four main “yield curves” to remain inverted. Only the 10-Year – Three Month curve remains in positive territory but it has been in a steep decline since early May.
The Global Dow has rallied to retake the 10-week moving average but will now have to break resistance to make that the case for further strength to the declining 40-week moving average. Despite a move above 40, the 14-week RSI remains in a bearish regime for now.
The relative trend has weakened further below resistance.
The Bloomberg Commodity Index tested and held the rising 40-week moving average while remaining below the declining 10-week moving average. The short-term trend is still under pressure, but the long-term bullish trend continues to hold. The 106 level is the key line in the sand for the long-term trend.
The 14-week RSI is holding in a bullish regime after testing the lower bound of this regime near 40.
Within the commodity complex, both pockets of the metals market have rallied after holding important support levels. Agriculture continues to dance with a key support level, and Energy is holding in a consolidation zone.
Holding these support levels while the broader index holds above 106 would be a bullish data point for this asset class.
The U.S. Dollar Index remains above the key 103 support level despite a recent retreat from the July peak. Further weakness could be a bullish signal for risk assets, especially if 103 is lost to the downside.
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