Key Points
- S&P 500 Hits Support at the 100-Day Moving Average
- Small Caps Remain a Choppy Mess
- NASDAQ 100 Could See a Short-Term Pop
- The 10-Year Note Breaks Down Again
- Commodities Are Strong, and the Dollar Holds Support
Mid-Week Market Update – United States
The S&P 500 has pulled back to test the rising 100-day moving average, below the declining 50-day moving average, as the pressure on the index continues to mount. Support at 4,550 remains important for the bullish trend. Below that level, the bears will be taking control. We see a near-term bounce is likely but retaking 4,725 is key for the bulls. Between these two levels, it is hard to have a high conviction view. Lower highs for the 14-day RSI speak to decreasing upside momentum.
The S&P Small Cap 600 has broken below the 100-day moving average after falling below the 50-day moving average last week. After breaking the short-term uptrend, the 14-day RSI is in the middle of the range. The choppy consolidation has not been in place for more than 10-months, and we are content to watch it play out.
The relative trend remains bearish as it holds below the declining 50-day moving average.
The NASDAQ 100 has broken support and the 100-day moving average after closing below the 50-day moving average last week. The trend appears to be shifting from bullish to neutral, as the 14-day RSI has been making lower highs and is pushing toward oversold positions. While we can’t rule out the prospects for a near-term rally that takes the index back to the 100-day moving average, it will take a break above that level to convince us that the bulls are beginning to regain control.
The relative trend remains the bigger issue for the bulls as support has been broken below the declining 50-day moving average. Until these two levels are overcome, odds favor a shift to underperformance.
The 10-Year Note has broken down again, negating the view of a countertrend rally that we thought was possible last week. The 14-day RSI continues to confirm the bearish price trend, moving into an oversold position once again. Below the declining moving averages, it is hard to make a compelling bull case, especially with a lot of room below current price levels.
The Bloomberg Commodity Index remains above the breakout level and the 50 and 100-day moving averages. Above 101, the bulls are in top position and are likely to make a run at the prior highs. Strength is confirmed by a rising 14-day RSI that sits in a bullish regime.
After finding support at the August low, the relative trend has retaken the 50-day moving average and resistance. The group is moving into a leadership position and will now set its sights on the October high.
The U.S. Dollar Index traded to and held support at the rising 100-day moving average and will not get ready to battle the 50-day moving average from below. There is still the matter of the declining trend line to contend with; however, above 94.50, the bulls are in control. The 14-day RSI is in a bullish regime, confirming this view.
Sentiment Check
The CBOE Volatility Index (VIX) has moved higher over the past week, trading to 22.79 from 18.41. The current level is not one that gives us a strong view on fear or greed but is moving closer to being bullish for the contrarian crowd.
The CNN Fear & Greed Index moved to a “neutral” position this week as the reading fell from 59 to 54.
Take-Aways:
While we can’t rule out the prospects for near-term rallies in the S&P 500 and NASDAQ 100, we note that the bulls are losing position and will have to fight hard to regain it. Commodities remain strong. The 10-Year Note has broken down further, and buyers run the risk of catching a falling knife.
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