Key points discussed in this week’s Roadmap:

• S&P 500 - May continues to frustrate investors. Overall, the choppy trading appears to be a relatively normal pattern of moving from overbought levels at the upper end of the S&P’s uptrend toward the lower end of the uptrend. First support is at 4000-4050 with another range of support between 3950-3983. While the S&P has been relatively resilient, keep a close eye on US 10-year yields and the small-cap indices as they have been notably weaker.
• Rates - Despite concerns of rising inflation and strong economic growth, US 10-year yields have stalled under their recent highs at 1.70% and are now challenging the lows of their recent trading range at 1.53%. We believe a break below 1.53% is likely to result in weakness in other asset classes, such as small-cap stocks, as investors question what the bond market is signaling with interest rates falling to their lowest level since peaking in March.
• Russell 200 Small-caps - Interestingly, while the economic reports have seemingly signaled a stronger economy, the Russell 2000, similar to US 10-year bond yield, has actually stalled and traded sideways for the past few months. In our opinion, a break below 2085 would complete a topping pattern for the small-cap index and would signal that investors are becoming more risk averse.