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Key Points

  • S&P 500 is Stuck Below Resistance
  • Small Caps and the NASDAQ Have Neutral Relative Trends
  • Treasuries Rally; Counter-Trend or Something Bigger?
  • Commodities Break Down
  • Volatility Remains Elevated

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Mid-Week Market Update – United States

The bears remain in control of the trend for the S&P 500, and the declining 50-day moving average is moving to within range of resistance in the 3,900 – 4,000 zone. The declining 100-day moving average points to the fact that the intermediate-term trend remains to the downside. Below 4,000, the pre-COVID highs are in play.

Momentum confirms the price action as the 14-day RSI sits in a bearish regime.

The S&P Small Cap 600 remains below the declining 50 and 100-day moving averages, seemingly intent on making a dash to the pre-COVID highs. Momentum confirms the bearish price action as the 14-day RSI has been below 60 since last November.

The relative trend is neutral, dancing with the 50-day moving average whole holding below the key October/November peaks.

The NADAQ 100 also remains in a downtrend, below the declining 50 and 100-day moving averages, with eyes for the pre-COVID highs. The 14-day RSI has been making lower highs since November and remains in a bearish regime.

Interestingly, the relative trend has begun to show some signs stabilization as it has not make a lower low since the end of May. The ratio is now testing the declining 50-day moving average. We are watching closely.

The 10-Year Note has staged a sharp rebound over the past two week to recapture broken support at the 2018 lows, and the declining 50-day moving average. The Note remains below the 100-day moving average. We believe it is prudent to respect the recent strength while awaiting evidence that it is more than a counter-trend rally from oversold levels.

The 14-day RSI has also rebounded from oversold levels but is holding in a bearish regime.

Over the past two weeks, we have highlighted reasons to the be less bullish on commodities. The Bloomberg Commodity Index has fallen below the 50 and 100-day moving averages, and the 50-day is moving to the downside. It appears likely that the 105-support level will be tested. The 14-day RSI confirm the bearish price action as it has moved into an oversold position.

The relative trend has also broken down, moving below the 50-day moving average.

Sentiment Check

The CBOE S&P 500 Volatility Index (VIX) has moved below 30 and its 10-day moving average. More interestingly, despite the still rising trend, the last two peaks has been at lower levels for the index and the moving average. Bulls would now like to see a sustain suppression of volatility. Something that has been elusive over the first half of 2022.

Looking at ATRs across time-frames, we can see that volatility remains elevated, with average moves near or greater than 2% per day. Should these trends persist, investors should be open to the idea that the S&P 500 could test the pre-COVID highs.

Take-Aways:

The bears remain in control of the trends across the U.S. equity landscape and volatility continues to trade at elevated levels. With the major indexes below key moving averages, odds favor a test of the pre-COVID highs. We have noted that in a bear market, nothing is immune, and over the past two weeks the sellers have found the commodity market. The index has room to support. Finally, treasuries have caught a bid, and we will now look for signs that it is more than a counter-trend move.

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Disclosure: This information is prepared for general information only and should not be considered as individual investment advice nor as a solicitation to buy or offer to sell any securities. This material does not constitute any representation as to the suitability or appropriateness of any investment advisory program or security. Please visit our FULL DISCLOSURE page.