Key Points

  • S&P 500 Breaks an Eight-Day Winning Streak
  • Small Caps & NASDAQ 100 Also Pause
  • 10-Year Note Reaches a Key Resistance Point
  • Commodities Pull Back to Important Support
  • Is Sentiment Now a Headwind?

Mid-Week Market Update – United States

After trading higher for eight consecutive days, the S&P 500 closed lower yesterday but remains in a bullish trend above the rising 50 and 100-day moving averages. While remaining above price-based support at the 4,545 level keeps the ball in the hands of the bulls, we can’t rule out a short-term consolidation/pause as the 14-day RSI remain in an overbought condition. The case can also be made that the index is somewhat extended above the moving averages.

After finally breaking to new highs last week, the S&P Small Cap 600 remains near record levels but also is showing signs of a near-term pause with the RSI in overbought conditions. The index is above the 50 and 100-day moving averages, but the key level is the breakout price near 1,400. Above this mark, the bulls are in control, and odds favor higher prices.

On a relative basis, Small Caps are holding above the 50-day moving average, and we are now looking for a break of the October peak to signal that the trend is to the upside.

The NASDAQ 100 is also stalling near record highs following a strong breakout last month. The index is above the rising 50 and 100-day moving averages and important support at the 15,600 level. This keeps the bulls in control for the time being, but we note that the 14-day RSI remains in an overbought condition.  

On a relative basis, the NASDAQ 100 is holding above the 50-day moving average but is having a hard time with the early September highs. Further relative weakness is likely to provide an opportunity near the moving average, setting the stage for another breakout attempt.

The 10-year Note continues to defy the consensus view that it must move much lower in the face of rising inflation as the near-term bounce that we have been looking for plays out. However, Treasury bulls are now in a “show me” situation with the Note meeting resistance at the declining 50-day moving average, which is below the 100-day moving average. Thus far, the rally has not been enough to push the RSI out of a bearish regime, keeping near-term momentum with the bears. Should a pullback hold support at the 130 level, then we would have to label the October lows as a false breakdown and begin to think about a bottoming process taking shape.

The Bloomberg Commodity Index has pulled back to the breakout level near 103 while holding above the rising 50 and 100-day moving averages. If commodity bulls are going to make a stand in the near term, this is the place as the “buy the dip” crowd can use the breakout level to manage risk. Thus far, the 14-day RSI is holding in a bullish regime during the pullback. The uptrend remains innocent until proven guilty by a break of support.

On a relative basis, the ratio has broken below the 50-day moving average and is now testing near-term support. Those in the camp of commodities outperforming equities will want to see this level held and a quick rebound ensue.

Within the commodity space, there are a few interesting developments, namely in Copper and Gold:

  • Copper – Holding support in the $4.30 – $4.40 zone.
  • Gold – At a key resistance point, a break above would argue for further upside.
  • Lumber – Holding below the $650 level.
  • Crude Oil – Consolidation continues; $75 is the key level for the bulls.

Sentiment Check

The CBOE Volatility Index (VIX) has moved higher on the week. Even though the S&P 500 has traded higher in eight of the past nine sessions, the VIX has not been able to move below the lows seen in July. A spike in the near term that coincides with the major averages holding above support would present an opportunity for equity bulls in our view.

The CNN Fear & Greed Index remains in a position of “Extreme Greed” this week, moving from 78 to 86. Over the past few weeks, we have said that sentiment is no longer a tailwind for equities, and that remains the case now. In fact, this is a level where sentiment may become a near-term headwind.


Trends in the equity market remain bullish, but we have come to a point where timing matters. It would not be surprising to see a near-term pause that allows the indexes to refresh before moving higher into the end of the year. All three of the major averages are overbought after strong moves to the upside. At the same time, the 10-Year Note has seen some renewed interest of late, and commodities are stalling. Finally, the VIX has not been able to make further downside progress, and the CNN Fear & Greed Index is in an “Extreme Greed” position, creating a potential headwind from sentiment. Near-term pullbacks above support will likely create opportunities to add exposure.


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