Support Levels
Are Being Tested

by | Feb 23, 2022

Key Points

  • S&P 500 Tests Key Support, Flashes a Bullish Divergence
  • Small Caps Still Trying for a Relative Breakout
  • NASDAQ 100 Has Bounce Potential but Is Still Lagging
  • Commodities Gap Higher, Remain Leadership
  • Sentiment Is Still More Fearful Than Greedy

Mid-Week Market Update – United States

The S&P 500 finds itself at support, near the 4,300 level once again. The index remains below the declining 50 and 100-day moving averages, and resistance near the 4,530 level. There is a small bullish divergence taking shape as the 14-day RSI is higher now than when the price was last at this level. It would not be surprising to see a bounce from current levels. However, the trend remains neutral while the price is between support and resistance.

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 made another lower high.

On a relative basis, Small Caps are holding above the 50-day moving average but have not been able to break above price-based resistance.

The NASDAQ 100 is in the process of testing (breaking?) key support as it remains below the declining 50 and 100-day moving averages. There is scope for a near-term rally as the 14-day RSI has made a bullish divergence.

On a relative basis, the NASDAQ 100 continues to underperform, trading below the declining 50-day moving average and price-based resistance.

The 10-Year Note finds itself in a bit of a no man’s land, for the time being, stuck between support at $125 and resistance at $128. From a trend perspective, the bears remain in control with the price below the declining 50 and 100-day moving averages. The 14-day RSI is holding in a bearish regime, lending momentum confirmation to the price trend.

The Bloomberg Commodity Index gapped to a new high yesterday, above the rising 50 and 100-day moving averages. This powerful trend continues to ignore overbought readings from the 14-day RSI, a sign that upside momentum is strong. Short-term support is now at the 110 level, with stronger support at 106. 

The relative trend also remains bullish, above the breakout level and trading at one-year highs.

Sentiment Check

The CBOE Volatility Index (VIX) remains elevated, closing over 28 yesterday, above the rising 10-day moving average. Over the past few weeks, we have noted that the moving average has been making higher highs and higher lows since November, signaling a growing level of fear in the market.

The CNN Fear and Greed Index ticked lower over the past week, moving to 35 from 38, to remain in a “fear” position.

Take-Aways:

The S&P 500 and the NASDAQ 100 have traded down to important support levels while their 14-day RSIs have made a small bullish divergence. It would not be a surprise to see a near-term bounce from current levels. However, it is hard to become too excited with prices below key moving averages. Away from equities, Commodities remain in a strong bullish trend and continue to outperform relative to stocks. The 10-Year Note is stuck in a holding pattern within a bearish trend.

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.