Take-Aways:
Equity investors looking for a bounce at the June lows have yet to have such hopes materialize. While the landscape appears bleak on top, under the surface, Small Caps and Commodities have begun to take a leadership role relative to the S&P 500. Forward-looking and realized volatility continue to trend higher as fixed income remains under pressure, leaving investors with few places to hide.
Mid-Week Market Update – United States
The S&P 500 continues to struggle below the June lows at the 3,630 zone, trading well below declining 50 and 200-day moving averages. While many investors have looked for a countertrend rally at these levels and have so far been disappointed, clearing the June lows to the upside would set the stage for such a move. RSI remains in a bearish regime after printing oversold readings late last month.
1,100 has been the zone that bulls and bears alike have kept their eye on in the S&P 600 over the past month of trading as the index oscillates around this battleground area. RSI remains below the 50 mark in a bearish regime, leaving the onus on the bulls.
Relative to the S&P 500, a glimmer of hope for small cap bulls has emerged; the group has broken out of the highlighted downtrend line in an early bid for outperformance above the ratio’s flat 50-day moving average. For those who must remain invested, the space is now much more interesting.
The NASDAQ 100 has wasted no time in undercutting the June lows over the past week of trading to test long-term support near 10,800. Much like the other major indexes, RSI remains in a bearish regime.
The relative trend is testing support at the early summer lows below the ratio’s declining 50-day moving average. If the bulls are going to make a stand for outperformance, this is the place, and now is the time.
The 10-Year Note has made a stabilization attempt in the downtrend at the 111 zone after yet another selloff over the past week of trading. The sheer distance between price and the 200-day moving average has become extended once again, leaving the door open for a countertrend rally to the June lows at 114. RSI continues to remain in a bearish regime, confirming the downtrend.
The Bloomberg Commodity Index remains trapped between the summer lows at the 110 zone and the 50 and 200-day moving averages. Bears look for resistance to hold at the moving averages while the bulls await a breakout. So long as the index remains above long-term support at the 105 zone, the benefit of the doubt is with the bulls. RSI has grounded higher from oversold readings late last month, and bulls want to see the bullish regime recaptured.
Relative to the S&P 500, Commodities have broken out of a key relative zone to the upside above the ratio’s rising 50-day moving average. This puts the June relative highs in play once again after the group gave up relative ground over the late summer.
Sentiment/Volatility Check
The CBOE S&P 500 Volatility Index (VIX) continues to grind higher, piercing the September highs and trading into the low 30s above its 10-day moving average. The equity environment continues to be characterized by heightened volatility that has yet to show signs of abating.
ATRs across one, three, and six-month timeframes continue their march to higher ground as the series of higher lows defines the longer-term uptrends. Here too, the trends within realized volatility across timeframes have yet to show signs of abating.
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