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Weekly Market Update:

Fundamental analysis:


With the recent rise in yields the market appears to be stalling as investors digest the rise in rates. We may be nearing an interim top in yields, but this move may extend higher short term, if yesterdays (3/18/21) highs are taken out - 1.76 (10 YR). The trend in equities still points sharply higher despite stalling at ATH, it’s important to zoom out and consider the bigger picture, I do still expect a test of 4000 (S&P 500) in April/May, as long as yields peak below 1.90 (10 yr) and start trading in a range below 2.00. 3770 needs to hold or we risk a deeper correction in equities. In my view this environment calls for caution and selectivity when considering new equity positions until rates calm down a bit.


Technical analysis:


I will review the chart of the United States 10 Year Treasury Yield and the chart of the S&P 500 Futures index.


U.S. 10 YR – TNX


Long term outlook (monthly chart):

It does appear for now that yields will continue to trend higher, 1.80 on the 10 YR should offer some resistance that ideally leads to some consolidation for yields, but in the event is does not, a surge to 2.00 would quite certainly shake the broader market and potentially disrupt the real economy.


Medium term outlook (weekly chart):

We have seen 7 straight weeks of higher rates. Equity market bulls want to see an end to this move ASAP.


Short term outlook (daily chart):

The moving averages have held strong, a breakdown would serve as a green light for adding risk in my view.


S&P 500 Index Futures – ES


Long term outlook (monthly chart):

We are far removed from the monthly moving averages, a reversion to mean move may take place in the coming months especially if helped along by higher rates.


Medium term outlook (weekly chart):

Note the rising 20 week moving average (3756) a breach below this level opens the door to a broader correction.


Short term outlook (daily chart):

3880 continues to be revisited on the S&P we tested it early in the session and bounced, this level needs to remain intact for immediate upside to continue.

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