Take-Aways:
While the S&P 500 and S&P 600 have had impressive weeks, the tech-heavy NASDAQ 100 continues to fall behind the bullish technical developments of its peers and has emerged as an underperformer once again. Commodities continue to consolidate as momentum within the space potentially builds energy for a directional move while the Ten-Year Treasury note attempts to stabilize below declining 50 and 200-day moving averages. Forward-looking (VIX) and realized (ATR) volatility has abated and provided a tailwind for the recent equity rally, but long-term bulls want to see further a further retreat.
Mid-Week Market Update: United States
The S&P 500 is testing the underside of the 3,900 zone that we have been calling out in our notes after recapturing the declining 50-day moving average over the past week of trading. Should the index break out to the upside, there is room for the 200-day moving average around the 4,100 mark. Note that RSI has broken out into a bullish regime to the upside, giving the bias to the bulls on a momentum basis, but they will need to see price eventually confirm to the upside.
The S&P 600 continues its drive higher over the past week of trading with the declining 200-day moving average at the 1,200-zone set in its sights. As price eyes the 200-day moving average, RSI is eyeing an overbought reading after breaking out into a bullish regime to the upside. Relative to the S&P 500, the group is testing long-term relative resistance at the highlighted zone above the ratio’s rising 50-day moving average. A relative breakout at this zone is a key technical development for equity bulls and risk appetite; we are watching closely.
While the NASDAQ 100 has not been left out of the rally over the past week of trading, the price action within the index can best be described as lackluster. The tech-heavy index has yet to recapture its 50-day moving average to the upside and break out into a bullish regime like its peers in the S&P 500 and S&P 600. To add, the group has broken down from relative support at the highlighted zone below the ratio’s declining 50-day moving average as the series of lower relative highs and lower relative lows continue to be a headwind for the index.
The Ten-Year Treasury Note continues its stabilization attempt at the 11 zone after rallying from the 109 lows in late October. The bias remains with the bears as price remains below declining 50-day and 200-day moving averages, although it would not be a surprise to see a countertrend rally due to the distance between price and the moving averages. RSI is testing the bullish breakout zone from above at the 45 zone and is one that the bond bulls will want to see held to the upside.
The Bloomberg Commodity Index continues to remain in price compression between a series of lower highs and horizontal support at the 111-zone. Should this zone give way to the downside, there is scope for long-term support at the 106 level to be tested. Similar to price, RSI continues to compress in a series of lower highs and higher lows as momentum in the space potentially builds energy for a directional move. Relative to the S&P 500, the group remains below relative resistance at the highlighted zone and the ratio’s flat 50-day moving average.
The CBOE S&P 500 Volatility Index (VIX) continues its retreat below the declining 10-day moving average over the past week of trading. While the declining trend of volatility is likely to be a tailwind for equities, it’s important to note that the VIX remains at elevated levels. Bulls want to see a continued decline in the index to add confidence should the equity indexes continue their drive higher.
Realized volatility continues to abate across timeframes but most remain above their long-term uptrend from the Q4 2021 lows. Only 63-day (three-month) volatility is currently threatening to break its long-term trend from above. While these are positive developments in the intermediate, longer-term bulls want to see a breakdown in these metrics to have a sustainable measure of confidence.
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