Key Points

  • Telecomm Services are Strong Globally
  • S&P 500 and NASDAQ 100 Continue Strong Bullish Trends
  • Small Caps Improve but Remain in the Range
  • 10-Year Note Refuses to Move
  • Sentiment Moving Toward Greed

Chart in Focus

We have been highlighting the strength in Telecommunication Services for the past few weeks. Interestingly, this strength is not isolated to the U.S. The S&P Global 1200 Telecommunication Services Index traded to a new high on an absolute basis yesterday. The index has been riding the rising 50-day moving average since November, a trend that seems likely to persist.

Relative to the S&P 500, the Index is beginning to make the turn to the upside and has retaken the 50-day moving average. Breaking near-term resistance could set the stage for further outperformance.

Mid-Week Market Update – United States

The S&P 500 remains in an uptrend above the rising 50-day moving average. First support is near 4,400 which lines up with the moving average. Below that, 4,250 is the key level for the longer-term trend.

The 14-day RSI continues to trade in a bullish regime. Last week we highlighted that this indictor has not been confirming new highs for the index, but this divergence will only become a concern if near-term support is broken to the downside.

On Friday, a powerful move to the upside took the S&P Small Cap 600 Index above the 50-day moving average. While this is an encouraging development that signals increasing participation in the equity market’s uptrend, we note that this index remains in the consolidation that began in March. Support is near the 1,250 level while resistance is near 1,400. The 14-day RSI is stuck in the middle of the range, confirming the neutral price trend.

On a relative basis, Small Caps remain in a downtrend vs. the S&P 500, below the declining 50-day moving average.

The NASDAQ 100 Index traded to a record level on Monday before pausing yesterday. The index is above the rising 50-day moving average and the support zone between 14,800 and 15,100. The 14-day RSI is near overbought levels after breaking the short-term downtrend. 

The relative trend for the NASDAQ 100 has broken above near-term resistance after a successful test of the rising 50-day moving average. Holding above this level sets the stage for an attack on the highs from earlier this year and continued leadership on the part of this group.

It is almost as if the 10-Year Note knows that we are all watching so it has decided not to move. Price remains trapped between the declining 200-day moving average and the rising 50-day moving average as it dances with the key $134 level. The 14-day RSI is not providing much help as it trades in the middle of the range. The fact that this indicator has established lows near 40 tilts the odds slightly in favor of an upside resolution for price.

We remain of the view that the direction of the resolution around the current consolidation will have an impact on relative trends in the equity market. An upside resolution (lower rates) would likely be a tailwind for the NASDAQ 100 and the Growth themes in the stock market. A break to the downside (higher rates) would likely favor the Value and Cyclical areas. This view is unchanged from last week.

The Bloomberg Commodity Index is making another attempt at clearing and holding the breakout level at 96. The index is above the rising 50-day moving average but remains in a consolidation. Waiting for a clear resolution appears to be the best course of action in the near-term.

The 14-day RSI is at neutral levels while the series of lower highs remains in place.

Drilling down on the key commodities that are on our radar:

  • Copper – bounce from support continues but the near-term trend is still a consolidation.
  • Gold – testing the underside of the broken consolidation pattern.
  • Lumber* – trying to hold support.
  • Crude Oil – rebound from the support at the $67 level.

*Note that Lumber is not part of the Bloomberg Commodity Index


On a week over week basis, there is not much that has changed in the prevailing trends. The S&P 500 and NASDAQ 100 continue to climb. The S&P 600 has improved, an encouraging development that speaks to better participation. However, the relative trend for Small Caps remains weak. We are still waiting for a resolution in the 10-Year Note which is likely to have important implications for leadership in the equity market. Finally, commodities are acting better but remain in their range.

Sentiment Check

The CBOE S&P 500 Volatility Index (VIX) has moved lower over the past week as the S&P 500 has continued to climb. The market’s “fear gauge” is becoming more complacent over the past few weeks, a development that we want to watch closely from a contrarian perspective.

The CNN Fear & Greed Index has moved from 37 last week to 53 this week and is now in a Neutral position. Over the past few weeks, this metric has been in a fear position, proving a contrarian tailwind to the equity market which has played out in higher prices. That tailwind could begin to dissipate with Fear & Greed now moving higher.

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.