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Key Points

  • S&P 500 Reaches a Key Resistance Level
  • Small Caps Retake the 50-Day Moving Average
  • The NASDAQ 100 Shows Further Relative Improvement
  • Commodities Hold Above Important Support
  • Volatility Metrics Begin to Turn Lower

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Mid-Week Market Update – United States

The S&P 500 has rallied to test the 50-day moving average and price-based resistance. These are the levels that we have been highlighting as key for the bulls to retake. For now, the index is below the declining 100-day moving average; however, that level is likely to be tested if the S&P 500 can close above resistance. 

Momentum remains in a bearish regime, unable to break above 60 on the current rally attempt.

The S&P Small Cap 600 is also testing the declining 50-day moving average from below on the heels of a strong day yesterday. Holding above that measure of trend sets the stage for an attack on the declining 100-day moving average. Bulls will want to see the 14-day RSI break from a bearish regime with a move above the 60-level on further price strength.

The relative trend is still neutral, dancing with the 50-day moving average while holding below the key October/November peaks.

The NASDAQ 100 did not sit out the rally in equities yesterday, making a strong move to close above the 5-day moving average while holding below the 100-day moving average. A run toward 13,000 can not be ruled out if price is above the 50-day moving average. The 14-day RSI is testing the declining trend line; breaking above it would be a bullish momentum data point.

The relative trend continues to improve, as we have been noting for the past two weeks. The ratio is holding above the 50-day moving average, which is shifting from declining to flat.

The 10-Year Note continues to work through the base-building process as it trades above the 2018 lows but below the 50 and 100-day moving averages. The trend still tilts in favor of the bears as the series of lower highs remains in place.

The 14-day RSI has rebounded from oversold levels but is holding in a bearish regime.

The Bloomberg Commodity Index remains below the 50 and 100-day moving averages, and the 50-day is on the cusp of crossing below the 100-day. However, the index remains above the key support level at 106. If this is the case, the long-term trend remains bullish despite near-term weakness. Retaking the moving averages would be a sign that the bulls are reasserting control. The 14-day RSI is bouncing from oversold levels but still needs to clear the declining trendline.

The relative trend remains below the recently broken 50-day moving average, which has started to turn lower.

Sentiment Check

The CBOE S&P 500 Volatility Index (VIX) continues to drift lower, below the 30-level and the declining 10-day moving average. We want to be clear that the index remains elevated and with a rising trend. Bulls would like to see the recent series of lower highs meet with a lower low for the 10-day moving average to signal a possible trend reversal.

Looking at the different ATRs, we can see that there has been some relief from elevated levels over the past month. The 21-day metric is in the process of breaking its uptrend from the November low. The 63 and 126-day ATRs still have room for their trend lines. A continued move to the downside would be a welcome development for equity bulls.

Take-Aways:

We won’t ignore yesterday’s strong moves in equities, especially as the index pushes up to its 50-day moving average. More time is needed to determine if this is simply another in a series of bear market rallies or something more sustainable. Continued relief in the volatility metrics that we track would be supportive of a more lasting change in the market’s trend. Away from equities, the 10-Year Note continues to build a base while commodities look to hold a key support level.

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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.