Strong and rising trends in CRB Index, gold, and yields on the 10 year Treasury persist, and collectively, this represents a headwind for equities. I last highlighted our composite indicator constructed from the trends in the CRB index, gold, and yields on the 10 year Treasury on February 18, 2011. Below I provide some links to a strategy that utilizes this indicator as a fundamental filter with the simple 40 week moving average on the SP500.

To review the strategy and its development, please click on these links:

"Developing a Trading Strategy (Part 1)"

"Developing a Trading Strategy (Part 2)"

"Developing a Trading Strategy (Part 3)"

Figure 1 is a weekly chart of the SP500 (symbol: $INX) with the indicator in the lower panel. The indicator remains in the extreme zone suggesting that equities face headwinds. The "short" and "cover" signals over the price bars represent recent times when this indicator was extreme.

Figure 1. SP500/ weekly

Lastly, if we look out a week or two it appears that these pressures are likelyto continue.