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Key Points

  • S&P 500 Stabilizes in a Bearish Trend
  • Small Caps Look to Improve on a Relative Basis
  • New Relative Lows for the NASDAQ 100
  • The 10-Year Finds the Declining 50-day Moving Average
  • Commodities Look to Reassert Their Bullish Trend

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Mid-Week Market Update – United States

The S&P 500 continues to trade below resistance near 4,200 and the declining 50 and 100-day moving averages. The index has now retraced 38.2% of the move from the March 2020 low to the January 2022 high. The bears remain in control of the trend until the series of lower highs and lower lows from the January peak is reversed.

The 14-day RSI did not become oversold on the recent move lower, but the indicator continues to trade in a bearish regime.

The S&P Small Cap 600 Index also remains below important resistance near 1,260, as well as the declining 50 and 100-day moving averages. The 14-day RSI is holding in a bearish regime, lending momentum confirmation to the bearish price trend.

The relative trend is holding above the 50-day moving average. Breaking above the October/November highs would set the stage for further outperformance.

The NASDAQ 100 is still in a downtrend, below resistance near 13,000 and the declining 50 and 200-day moving averages. The 14-day RSI has not become oversold but remains in a bearish regime.

The relative trend is bearish, below the declining 50-day moving average, and traded to a new two-year low yesterday.

The 10-Year Treasury Note has held support at the 2018 lows, enabling the countertrend rally that was called out last week to continue to play out. The rally has brought the Note the underside of the declining 50-day moving average, which is below the declining 100-day moving average. The bears keep control until the moving averages are breached to the upside.

The 14-day RSI continues in a bearish regime.

The Bloomberg Commodity Index is holding above short-term resistance and the rising 50-day moving average as it attempts to reassert its uptrend after a pause. The rising 100-day moving average has moved into line with the price-based support near 120. The 14-day RSI is in a bullish regime and is breaking the downtrend from the March peak.

Commodities continue to outperform equities as the ratio trades above the 50-day moving average and near its recent highs.

Sentiment Check

The CBOE S&P 500 Volatility Index (VIX) and its 10-day moving average have fallen below 30 after both made lower highs on the most recent spike. The regression line (black) is still rising, indicating that the trend is to the upside. We also note that as equities have come under pressure in 2022, the VIX has not made an extreme run to the upside, a possible indication that investors have not fully capitulated.

Volatility remains elevated across timeframes when we look at the 21, 63, and 126-day Average True Ranges. As with the VIX, the ATRs generally rise when markets are under pressure and fall as stocks advance.

Take-Aways:

In the near term, stocks in the U.S. are trying to stabilize, but this pause in their bearish trends is playing out below important resistance levels and declining 50 and 100-day moving averages. Treasuries have found some support at the 2018 lows and rebounded over the past week. The 10-Year Note now faces a key test at the 50-day moving average. Commodities are trying to reassert their uptrend and remain bullish. Finally, volatility remains elevated across timeframes, indicating that investors are still more fearful than greedy.

This daily note is brought to you by Research by Potomac. Access the full Advisor toolkit and get a deeper look at the markets.

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.