Key Points

The Air Freight and Logistics Index gapped to a new high with a momentum confirmation. Consolidations in Small Caps and the NASDAQ are within a long-term uptrend, odds favor a continuation higher. Sentiment is becoming more bullish but is not signaling extreme levels of “froth.”

Chart in Focus

Up and Out:

The S&P 500 Air Freight & Logistics Index gapped to a new high yesterday, exiting a consolidation that has been in place since October. The powerful move to the upside took the 14-day RSI back into an overbought position, lending a momentum confirmation, and we note that this indicator has been making higher lows since the start of the year.

On a relative basis, the group is moving up and out of a consolidation after holding support, increasing the odds of further outperformance for this important industry group within the Industrial sector.

Mid-Week Market Update – United States

The S&P 500 continues to grind to the upside, trading to new highs in the early stages of the week. The index is above the rising 50-day moving, which is above the rising 200-day moving average. The 14-day RSI remains in a bullish regime as it works off an overbought condition, signaling that there is a momentum confirmation to the price trend.

In the near-term, there is support in the 3,950 – 4,000 zone. Below that there is more important support at the 3,600 level, just below the 200-day moving average.  

The S&P Small Cap 600 Index has, thus far, held support at the rising 50-day moving average as it continues in the consolidation that began in February. The rising 200-day moving average lines up with the breakout level at the 2018 and 2020 highs. The 14-day RSI has not become oversold since the pandemic lows and, during the current consolidation, has held within a bullish regime. This is a signal that the consolidation is most likely a pause within a bigger bullish trend.  

On a relative basis, the Small Cap 600 Index is testing support at the 2019 consolidation. The recent pullback is most likely a pause after a strong run that began in November and odds favor a resolution to the upside. 

The Nasdaq Composite Index is on the cusp of trading to a new record high, coming within 4 points yesterday before fading into the close. The sideways trading that has been in place since February has caused the 50-day moving average to shift from rising to flat while the 200-day moving average continues to advance. The current consolidation is playing out within the context of a larger uptrend and it would take a break below the September high to alter this view. 

On a relative basis, support continues to hold but bulls would like to see a higher high in the coming days.

Sentiment Check

The S&P 500 Volatility Index (VIX) has moved lower on the week and is back into the range that marked trading for much of 2019 as the S&P 500 continues to trade to new highs.

The CNN Fear & Greed Index is at a reading 59, up from 47 last week. This puts the index back into a “greed” position, but it is not at levels that would point to taking a contrarian view.

Take-Aways

Trends for the primary markets in the U.S. remain to the upside. Consolidations in the NASDAQ and Small Caps are playing out within the context of longer-term uptrends and are not showing signs of an impending breakdown.

Sentiment is becoming more bullish, but we are hard pressed to the see levels of “froth” that would justify taking a contrarian view.

Disclosure: This information is prepared for general information only and should not be considered as individual investment advice nor as a solicitation to buy or offer to sell any securities. This material does not constitute any representation as to the suitability or appropriateness of any investment advisory program or security. Please visit our FULL DISCLOSURE page.