Trend & Cycle Roadmap

1 RBC Capital Markets, LLC / Portfolio Advisory Group All values in dollars and priced as of May 11 at 4:00 pm ET unless otherwise noted For Important Disclosures, see page 4 Investment and insurance products offered through RBC Wealth Management are not insured by the FDIC or any other federal government agency, are not deposits or other obligations of, or guaranteed by, a bank or any bank affiliate, and are subject to investment risks, including possible loss of the principal amount invested. Produced: May 11, 2022 17:03ET; Disseminated: May 11, 2022 17:10ET Lower lows for equity markets confirm downtrend as rates pause at 2018 Cycle highs Wednesday s CPI report did little to alter the negative trajectory of equity markets, but interestingly, treasury yields continue to show very early signs of pausing under critical technical levels.

2 In our recent Roadmap publications (May 4, April 27) we focused on the long-term Cycle charts for the S&P 500 to illustrate the repetitive 3-4 year cycles of expansion and contraction that have developed and to highlight that the current Cycle Trend has begun to turn negative. Over the past week, the S&P 500 broke below an important technical support band and risk control level between 4100-4200, establishing the first lower low for the Cycle that began in 2020, and by definition confirming a downtrend. Next support level is at 3800 at the 38% retracement level of the 2020-2021 rebound, followed by 3500, coinciding with the 50% retracement level and just above the rising 200-week (4-year) moving average.

3 What s next? In the short-term, equity markets are very oversold and contrarian sentiment indicators suitably bearish to support a rebound. However, until the Trend of lower highs and lower lows is reversed, investors should be prepared for the current Trend to continue lower. At a minimum the S&P will need to recapture its prior support level between 4100-4200, while considerable resistance remains in the 4500-4600 level. On the following page we review the 10- and 2-year yield charts for signs of green shoots . Technical Strategy Trend & Cycle Roadmap Robert Sluymer, CFA Technical Strategist, Portfolio Advisory Group May 11, 2022 Page 2 of 6 | Technical Strategy Trend & Cycle Roadmap , May 11, 2022 US 10-year yield Back to the 2018 Cycle highs with weekly momentum beginning to peak The Trend for 10-year yields remains up as they test their next critical technical level at the Q4 2018 Cycle highs between While there is no meaningful evidence of a Trend reversal, weekly momentum (bottom panel) is beginning to turn down from overbought levels which is often a precursor of a peak developing in yields.

4 Our view: It s early to conclude yields are peaking but our expectation is for yields to continue to stall under their 2018 highs. First support is at US 2-year yield Also early signs of stalling at the prior Cycle highs in 2018 near Similar to the US 10-year yield, the US 2-year yield is showing very early evidence of stalling at the Cycle highs that developed in 2018 just below Note: the weekly momentum indicator in the bottom panel has been diverging for the past few weeks suggesting further pullback/pause in the coming weeks. Page 3 of 6 | Technical Strategy Trend & Cycle Roadmap , May 11, 2022 Growth relative to Value remains in a downtrend with large-caps breaking to lower lows We have featured the growth relative to value charts below regularly in the weekly Roadmap to illustrate the progressive deterioration in growth stocks.

5 While most investors are well aware of the ongoing weakness in growth stocks, notably mid and small-cap (center and bottom panels) over the past few quarters, what is noteworthy is that large-cap growth versus value broke to a new lower low over the past week. Here again, by definition, large-cap growth is technically in a downtrend versus value having established a lower low. This performance reflects the progression of breakdowns below important support defined by the Q1 lows with some of the most widely held, mega-cap growth stocks, also known as the market s generals, finally giving way to the broader weakness that has been in place for smaller growth stocks over the past few quarters.

6 While it is not uncommon to see the large-cap leaders break down in the later stages of a broad market correction, it is still too early to conclude a bottom is developing for the majority of growth stocks. For now, the charts below continue to support underweighting growth stocks in favor of value stocks and waiting for technical evidence that these trends are reversing before considering adding exposure to growth stocks. Page 4 of 6 | Technical Strategy Trend & Cycle Roadmap , May 11, 2022 Disclosures and disclaimers This comment is prepared by the Technical Research team at RBC Wealth Management. All views expressed are the opinions of Technical Research based solely on the historical technical behavior (price and volume) and their expectations of the most likely direction of a market or security.

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