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.
