- New Highs for Taiwan Add to the Bull Case for Technology
- S&P 500 and NASDAQ 100 Trade to Record Levels
- Small Caps Give Up Their Leadership Position
- Commodities Pause After a Strong Rally
- Sentiment Remains More Fearful Than Greedy
Chart in Focus
In our note yesterday, we highlighted the fact that Technology was reemerging as a leading sector within the U.S. market. However, this may not be a purely domestic trend. The technology-heavy Taiwan Stock Exchange is in the process of breaking out of the consolidation that has been in the place since March. The index is above the 50-day moving average which barely broke its stride as the index consolidated.
We would like to see the 14-day RSI confirm price strength by making a higher high, but we note this indicator is in a bullish regime.
Mid-Week Market Update – United States
The S&P 500 traded at another record high yesterday before fading into the close of trading. The rising 50-day moving average is on the verge of reaching the breakout level near 4,250, which would strengthen that mark as important near-term support. Pullbacks that hold above 4,250 are likely to be met with buyers. The rising 200-day moving average is well below and not a factor currently.
After breaking a short-term downtrend line, the 14-day RSI remains in bullish ranges and close to an overbought condition, lending a momentum confirmation to the bullish price trend.
For the S&P Small Cap 600, trading remains choppy. The index is stuck in a range that has been in place since March, oscillating around the 50-day moving average. After a strong move beginning in November, this appears to be a correction through time as the Small Caps hold above price-based support and the 200-day moving average. Momentum confirms the rangebound trading with the 14-day RSI in the middle of the range.
While price is correcting through time, the relative trend is weakening. The ratio is moving lower, below a declining 50-day moving average.
The NASDAQ 100 Index also traded to a record high yesterday before succumbing to some late selling pressure. The index is above the breakout level, near 14,200, and the 50-day moving average. The rising 200-day moving average is now in the range of the February – May consolidation and would likely be a key measure of support should it be tested. Momentum confirms the bullish price trend with the 14-day RSI at overbought levels.
On a relative basis, the NASDAQ 100 appears to be reasserting a leadership position, which would be confirmed with a break to new highs. For now, the ratio has cleared a near-term consolidation and is above the rising 50-day moving average.
The 10-Year Treasury Note continues to have a hard time breaking through resistance at the $134 level, a dynamic that we discussed on the latest edition of Who Charted. It is interesting to note that the action in the 10-Year mirrors that of the S&P 600. Support remains at the bottom of the current range, which lines up with the 2019 highs. Price holding between the rising 50-day and declining 200-day moving averages sets the stage for the consolidation to continue in the near-term.
Momentum confirms choppy trading with the 14-day RSI in the middle of the range.
After reaching extremely overbought conditions, based on the 14-day RSI, the Bloomberg Commodity Index remains in a consolidation above support and the rising 50-day moving average. This appears to be a pause after a strong rally from the pandemic lows. However, should support give way, odds favor a swift fall toward the 83 level. This is not the base case currently.
Within the commodity complex:
- Copper – continues to consolidate above support
- Gold – showing signs of stabilization but has not broken the downtrend
- Lumber – remains in freefall
- Crude Oil – the breakout is intact
The CBOE S&P 500 Volatility Index (VIX) is flat over the past week with the S&P 500 trading to record levels. As we have mentioned, there is room to the extreme levels of complacency which have been reached in the past.
For all the talk of extreme exuberance in the market, it is simply not being picked up by the CNN Fear and Greed Index. The current reading of 35 is lower than what was seen last week and keeps the index in a Fear position.
Record highs for the S&P 500 and NASDAQ 100 indexes point to keeping the bull market for equites intact. Small Caps have essentially given up the leadership position that they had held since November. Being overly bullish on the 10-Year Note remains premature, as it is yet to break from its consolidation. Commodities are likely pausing within their uptrend. With equities at or near record levels, sentiment is not exuberant.