Key Points

  • Gold Stocks Shine in a Choppy Start to the Week for Equities
  • The Trend in the S&P 500 is Up but we Note the Momentum Divergence
  • Small Caps are Breaking their Relative Uptrend…
  • …While the NASDAQ Completes a Topping Process vs. the S&P 500
  • Sentiment is Neutral with a Small Bearish Tilt

Chart in Focus

The S&P 500 Gold Index caught our attention on April 22nd, and has closed higher over the past two days. The index is above the 50 and 200-day moving averages, and the former is on the verge of crossing above the latter. We also note that there is a momentum shift taking place, with the 14-day RSI moving into a bullish regime (bottoming at a higher level) after failing to become oversold at the March lows. On a relative basis, the Gold Index traded at a 21-day high yesterday and appears to be in the process of shifting from a bearish trend to a bullish trend. A close above relative resistance would complete the transition.

Mid-Week Market Update – United States

The S&P 500 has started the week on its back foot, closing on the low Monday and then gapping to the downside yesterday. The weakness in the near-term is playing out after last week’s high was not confirmed by momentum, as the RSI failed to make a new high with price. For now, the S&P 500 remains in an uptrend, above the rising 50 and 200-day moving averages. However, the momentum divergence has our attention and would be confirmed with a break below the 4,000 level.

The S&P Small Cap 600 Index is testing the 50-day moving average after failing to make a new high with the S&P 500 last week. Below the 50-day, support at the 1,250 level is important. Holding that line will keep the index in the consolidation that has been in place since mid-March. Below 1,250, the door is open for a test of the rising 200-day moving average, which is currently near 1,105. Momentum is holding within bullish ranges, despite making a series of lower highs.

The bigger concern is on a relative basis, where Small Caps are in the process of breaking the uptrend that has been in place since the beginning of October. This will be a key development, as further weakness would signal that leadership is shifting under the surface of the market.

The NASDAQ Composite Index closed below the, now flat, 50-day moving average despite a rally attempt yesterday afternoon. The index has been in a consolidation since the middle of February, and we note that the recent highs in March were met with a lower high on the part of the 14-day RSI. This divergence would be confirmed with a break of support at the 12,400 level. For now, we defer to the view that this is simply a consolidation within a larger uptrend, as the RSI has yet to become oversold.

As with the Small Caps, the bigger issue for the NASDAQ is with relative strength. The group is now in a downtrend vs. the S&P 500 and is breaking relative support to complete a topping process.

Sentiment Check

The S&P 500 Volatility Index (VIX) has regained the 20 level after fighting for more than a year to break below it. The recent move to the upside is noteworthy as the S&P 500 has come under pressure but it may be premature to draw any firm conclusions, as the VIX remains in a downtrend since peaking in March 2020.

The CNN Fear and Greed Index closed yesterday at the 49 level, down from 51 last week, to remain in a Neutral position. The index is not flashing a contrarian signal in either direction currently. Generally, readings below 20 are a sign of excess fear, while readings above 80 point to too much greed in the market.


With equities under pressure to start the week, we note that the long-term trends remain to the upside. Bouts of market weakness are an opportunity to notice which groups are bucking the trend, and the S&P 500 Gold Index stands out to us on an absolute and relative basis. At the same time, the weakening relative performance of Small Caps has our attention along with the relative breakdown in the NASDAQ Composite Index. Sentiment has moved slightly in the direction of fear but is not giving a contrarian signal currently.
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