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Take-Aways:

Both the S&P 500 and the S&P 600 have experienced minor improvements over the past week, but it has not been enough to get the bulls cheering. The NASDAQ 100 continues to struggle while the Ten-Year Note attempts to stabilize once again. Commodities have awakened out of compression and should likely be an asset class for diversified investors to have on their radar screen.

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Mid-Week Market Update – United States

The S&P 500 has recaptured the declining 50-day moving average over the past week of trading as the index sets up another attack on the 3,900 level from below. Should the index clear 3,900 to the upside, there is room for the declining 200-day moving average at the 4,100 area. RSI has pared back to the 50 level in a neutral stance after breaking out of this zone last month and will likely be a key area that the bulls want to see held to the upside.

The S&P 600 continues to grind higher above the declining 50-day moving average with the 200-day moving average set in its sights. Note that the index was rejected at the declining 200-day moving average in August and will be an indicator that the bulls want to see taken out to the upside. RSI has pared back below the 60 zone after failing to get overbought and remains a risk to the recent upside move. Relative to the S&P 500, the group continues to knock on the ceiling of long-term relative resistance above the ratio’s rising 50-day moving average. More time is needed.

The bears remain in control of the NASDAQ 100 as the index struggles to lift off from support near the 11,000 mark below the declining 50-day moving average. Momentum in the space continues to wane as RSI remains in a bearish regime. Relative to the S&P 500, it was yet another week of underperformance as the ratio drives lower below relative resistance at the highlighted zone and the declining 50-day moving average.

The Ten-Year Treasury Note is making a stabilization attempt at the October lows of 109.5 after another week of declines. Note that RSI has lost the bullish momentum breakout zone to the downside and is testing this level from below. The 45 zone in RSI has proved to be a headwind in the past, and is likely a key zone for investors to keep an eye on.

The Bloomberg Commodity Index has broken out of the downtrend line to the upside that we have been highlighting over the past few weeks, in addition to recapturing the declining 50-day moving average over the past week of trading. The 200-day moving average at the 121 zone now comes into play. RSI has broken out of compression to the upside, confirming the price action at the index level. Relative to the S&P 500, the group has recaptured the 50-day moving average to the upside but remains below relative resistance at the highlighted zone.

Sentiment/Volatility Check

The CBOE S&P 500 Volatility Index has pared back some of the recent declines over the past week but remains below the declining 10-day moving average. While the recent decline in volatility has been a tailwind for equities, investors want to see a continued decline in this index.

Realized volatility via ATRs continues to abate across one, three, and six-month timeframes. Of note is that 63-day volatility is currently threatening its uptrend, while there is still room for 21 and 126-day volatility to decline. While these have been bullish developments for equities, bulls want to see these uptrends materially broken to the downside.

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