Key Points

  • “Defensive” Weakness at the Industry Level
  • Another Record High for the S&P 500 and NASDAQ 100
  • Small Caps Try to Rally, Testing Moving Average Resistance
  • 10-Year Note Tests a Key Level as the Moving Averages Pinch
  • Sentiment is Unchanged Over the Past Two Weeks

Chart in Focus

Yesterday we highlighted that some of the “defensive” sectors of the equity market were continuing to lag. Drilling down, this dynamic can be seen at the industry level as well. The S&P 500 Food, Beverage, & Tobacco Index is testing the flat 50-day moving average as it trades in a consolidation.

On a relative basis (bottom panel), the group has been a steady underperformer. The ratio is below the declining 50-day moving average and traded to a new low yesterday.

Mid-Week Market Update – United States

The S&P 500 traded to another record high yesterday before fading into the close. Dip buyers continue to be rewarded as last week’s pullback was halted at near-term support at the 4,400 level, just above the rising 50-day moving average. The area near 4,250 remains key to the uptrend that has been in place since March 2020.

The 14-day RSI remains in a bullish regime but, once again, new highs in price have not been confirmed by this indicator. A break of near-term support would put this bearish divergence in play.

A rebound attempt in the S&P Small Cap 600 has taken the index to the underside of the declining 50-day moving average. The consolidation that has been in place since March of this year continues to play out, confirmed by the 14-RSI which sits in the middle of the range. The bottom of the range, near the 1,250 level is support.

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 also traded to a record high yesterday after rebounding from price-based support and the rising 50-day moving average. Like the S&P 500, the 14-day RSI failed to confirm the record price high. This divergence would become important if the index were to break below the 14,500 level.

The relative trend for the NASDAQ 100 tested price-based and moving average support last week before turning higher again this week. Above this support level, odds favor a continuation of outperformance on the part of the NASDAQ 100.

As we discussed when viewing the weekly chart on Monday, the 10-Year Note (price, not yield) is trapped between the 50 and 200-day moving averages which are inching closer together. At the same time, the $134 breakout level is being tested. The 14-day RSI is holding in a bullish regime but is currently in the middle of the range, confirming the consolidation on price.

We remain of the view that the direction of the resolution of 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.

The Bloomberg Commodity Index briefly lost support at the 50-day moving average but a two-day rally has regained this measure of the intermediate-term trend. We remain of the view that the late July highs were a false breakout and note that since that time, the index has been making lower highs and lower lows. 

As with price, the 14-day RSI has been making lower highs and lower lows of late, signaling that upside momentum is waning.

As the index has rebounded to start the week, so have some of the key commodities that are on our radar.

  • Copper – bounce from support, consolidation still in place.
  • Gold – testing the underside of the broken consolidation pattern.
  • Lumber* – trying to regain support.
  • Crude Oil – holding support at the $67 level.

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


The uptrends for the S&P 500 and NASDAQ 100 remain in place and should be respected. For both, the RSI has failed to confirm record highs, but these divergences only become important with breaks of support. Small Caps remain in a consolidation and a lagging segment of the market. We continue to believe that the direction of the 10-Year Note holds the key to stock market leadership going forward.

Sentiment Check

The CBOE S&P 500 Volatility Index (VIX) is little changed over the past two weeks, hovering around the 17 level after a brief spike last week. This largely lines up with the fact that there has been no change to the market trends which we highlight above. We note that these spikes have been ending at lower levels, keeping the VIX in a downtrend since the highs seen in March 2020.

The CNN Fear & Greed Index remains in a “fear” position at a reading of 37, flat from last week and up one point since we last wrote about it two weeks ago. With the S&P 500 and NASDAQ 100 continuing to make record highs, this metric has remained in a “fear” position, rewarding those with a contrarian leaning.


Sentiment is unchanged over the past two weeks despite the S&P 500 and NASDAQ 100 trading at record levels.

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.