Last week, we saw an impressive rebound in the US stock market. The big question facing investors now is, was this a bear market rally or the start of an uptrend?

Based on my research, it is still a bit too early to tell. While I am seeing numerous buy signals in our short-term models, the sectors that have been driving the market higher this past week are not the sectors you would expect to see in a rising interest rate environment.

Taking a look at the S&P 500 index, there have been some positives — a breakout above the downtrend line and improving positive momentum.

However, the market starting to look overbought in the short term as the S&P 500 is nearing support within the cloud model.

If the market can breakout above “the cloud”, I would view this as an extremely positive market signal.

In addition, I would like to see the S&P 500 trade above its 200 day moving average and an increase in the number of stocks that are above their respected 200 day moving average.
Growth sectors, like technology, helped push the US equity market higher last week. Typically growth does poorly relative to value stocks when interest rates rise.

Tech is still trading below its 200 day moving average and is beginning to look overbought.

The longer-term relative strength between the S&P 500 and technology still remains in a downtrend as well.

All these factors indicate that last week’s rally in the market may be a short-term countertrend move.

This week will provide us with more evidence whether this is just a short-term move or the beginning of a long-term and tradable move upwards.

Chart of the Week:

“Help Wanted” signs are a common sight in towns and cities across the country.  According to conventional wisdom, the shortage of workers (aka “missing workers”) is due to older workers, after enjoying outsized gains in their stock portfolios and real-estate holdings, exiting the workforce.

However, a deeper look into labor force data from the U.S. Census Bureau shows this isn’t exactly the case.

For example, for those ages 62-70, 37.4% were employed in January 2020.  That percentage dipped to 30% in April 2020 but rebounded to 36% in January 2022.

Similar calculations are done for each age group, shown below.  It turns out that the age group contributing most to the “missing workers” total is actually the 15-34 age group.

That group alone accounts for 42% of the “missing workers” total. (Chart by Marketwatch.com)

Riverbend Indicators:

Each week we post notable changes to the various market indicators we follow.
  • As a reading of our Bull-Bear Indicator for U.S. Equities (comparative measurements over a rolling one-year timeframe), we remain in Cyclical Bull territory.
  • Counting up of the number of all our indicators that are ‘Up’ for U.S. Equities, the current tally is that two of four are Positive, representing a multitude of timeframes (two that can be solely days/weeks, or months+ at a time; another, a quarter at a time; and lastly, the {typically} years-long reading, that being the Cyclical Bull or Bear status).

The Week Ahead: