Key Points
- S&P 500 Challenges a Key Resistance Level
- Small Caps Hold the Bottom of the Range
- NASDAQ 100 Remains Stuck in Neutral
- Commodities Take a Needed Breather, Crude Is the Main Driver
- Sentiment is Still More Fearful Than Greedy
Mid-Week Market Update – United States
The S&P 500 continues to do battle with price-based resistance at the 4,550 level but remains below the 50 and 100-day moving averages. During the rally from the January low, the 14-day RSI has remained in a bearish regime, unable to break meaningfully above the 50. This leaves the indicator in a position of making lower highs since peaking in November. The benefit of the doubt stays with the bulls, but we want to see a break of resistance and the moving averages to increase confidence further from here.
The S&P Small Cap 600 has done an admirable job of holding support at the lower end of the 2021 consolidation zone. Above the 1,250 level, there is scope for a move back to the declining 50 and 100-day moving averages. We would like to see a stronger showing from the 14-day RSI, which remains stuck in a bearish regime and has been making lower highs since November.
On a relative basis, the trend is still bearish, below the declining 50-day moving average.
The NASDAQ 100 has also held important support at the January lows, keeping the door open to a move back to the declining 50 and 100-day moving averages. Note that these moving averages line up with a key resistance level at 15,500. Breaking above that mark will increase the odds that the bulls are regaining control. Here too, bulls want to see a better showing from the 14-day RSI.
On a relative basis, the ratio is below resistance with lines up with the declining 50-day moving average. These levels must be broken to the upside to be confident that this index is taking a leadership position.
The 10-Year Note remains in a clear downtrend, below the declining 50 and 100-day moving averages, and now has resistance at the 128 level. There is room for further downside to the next support level near 125. The 14-day RSI lends a momentum confirmation to price weakness, trading in a bearish regime.
The Bloomberg Commodity Index is trading near one-year highs, above the rising 50 and 100-day moving averages but has taken a pause after a strong rally to start the year. The breakout level at 106 is a logical point of support. Below that, holding the rising 50 and 100-day moving averages would keep the trend in favor of the bulls. The 14-day RSI is working off an overbought condition.
The relative trend also remains above the breakout level, which we would expect to provide support in the near term.
A key driver of strength in the commodity complex has been Crude Oil. After trading to a high on Friday, Crude has pulled back over the past two days. It remains above the breakout level, near $85, that we would expect to act as support in the near term. Below support, the moving averages come into play. Holding those would keep the trend to the upside.
The 14-day RSI is in the process of working off an overbought condition but remains in a bullish regime. The bias remains to the upside for now.
Sentiment Check
The CBOE Volatility Index (VIX) remains in retreat mode after spiking in late January. Both the VIX and its 10-day moving average are heading lower. We are still interested in the fact that the moving average has been making higher highs and higher lows since the October bottom. Breaking this pattern, as the major averages continue to hold support, would be a sign that some fear is leaving the market.
The CNN Fear and Greed Index saw a slight increase on the week, from 34 to 37, but remains in a “fear” position.
Take-Aways:
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