Key Points
- S&P 500 Breaks Support
- Small Caps Look to Take a Leadership Position
- NASDAQ 100 Breaks Down, Still Lagging
- Big Reversal Day for Commodities
- Sentiment Is More Fearful Than Greedy
Mid-Week Market Update – United States
The S&P 500 is in the process of breaking below the 4,200 – 4,300 support zone that we have been highlighting. The index remains below the declining 50 and 100-day moving averages. The 14-day RSI has been flashing a bullish divergence for the past few weeks. It would not be a surprise to see a short-term rally, but it would be countertrend in nature.
The S&P 600 is also below the declining 50 and 100-day moving averages while remaining above support at the 1,250 level. At the same time, the 14-day RSI has also made a higher low, leaving a bullish divergence in place. Momentum is still in a bearish regime, but the resilience of this “riskier” market continues to grasp our attention.
While we are hard-pressed to call the absolute trend bullish, the relative trend speaks to the fact that “less bad is good enough.” The ratio is moving toward the next resistance level above the 50-day moving average. A breakout could be a clear sign that Small Caps are taking a leadership position.
The NASDAQ 100 has also broken below support while trading below the 50 and 100-day moving averages. The divergence that we have been highlighting remains in place, and it would not be a surprise to see a countertrend rally in the near term. However, until 14,100 is reclaimed, it is hard to make the bull case.
In the latest episode of Who Charted?, we highlighted the underperformance of this index. The ratio remains in a downtrend, below the declining 50-day moving average. Support at the May low is now being tested.
The 10-Year Note continues to wrestle with the declining 50-day moving average of the key $128 level. This grudge match plays out below the declining 100-day moving average. While we have been in the bearish camp, we are open to the idea that a break above $130 would be a reason to reassess our view.
The 14-day RSI is still in a bearish regime despite spiking to the upside last week.
The move higher in the Bloomberg Commodity Index accelerated over the past week. However, after a bullish run, yesterday gave us a big reversal to close near the low of the day. The index is extended above the rising 50 and 100-day moving averages. It would not be a surprise to see a pause in the rally, especially with the 14-day RSI nearing 90.
The relative ratio has made a parabolic move to the upside, above the rising 50-day moving average.
Sentiment Check
Fear in the marketplace remains elevated as we can see with the CBOE S&P 500 Volatility Index (VIX) and its 10-day moving average trading near their highest levels in more than a year.
The VIX Curve is inverted once again. This could be a tailwind for a countertrend rally in the S&P 500 is the index can reclaim the 4,200 level.
Take-Aways:
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