- Building Products Reasserting Leadership Position?
- S&P 500 Finds Support at the 50-Day Moving Average Again
- Small Caps Test and Hold the Bottom of the Range
- Commodities Consolidate in a Bullish Trend
- Sentiment is Fearful with the S&P 500 Near Record Highs
Chart in Focus
The S&P 500 Building Products Index appears to be reasserting a leadership position after consolidating over the past few months. The index has moved to the top of the recent trading range after finding and holding support at the 50-day moving average. A break to new highs would be a signal that the uptrend is resuming. A similar dynamic is at play in the relative ratio. Building Products are on the verge of breaking to new highs vs the S&P 500.
Mid-Week Market Update – United States
The S&P 500 staged a rebound from the short-term support level that we defined in this note last week, where the rising 50-day moving average meets the breakout level. This is the seventh time this year that the 50-day moving average stood its ground, continuing to define the trend for the index. The rising 200-day moving average is not a factor currently.
Importantly, from a momentum perspective, the 14-day RSI continues to hold within a bullish regime. The lows for this indicator have not broken below the 40 level. In strong uptrends, the RSI will often fail to reach the accepted oversold level of 30. Investors who wait for the 30 level to be reached may often miss large parts of the trend.
The S&P 600 Small Cap Index also staged a rebound yesterday, finding support at the bottom of the consolidation zone near 1,250. The rising 200-day moving average is also likely to reach this support level in the days ahead.
On a relative basis, Small Caps are now a laggard, trading below the declining 50-day moving average and resistance.
The NASDAQ 100 Index remains above the breakout level and the rising 50-day moving average, both of which are likely to provide support in the event of a near-term pull back. The rising 200-day moving average is in the February – May consolidation zone. Momentum continues to confirm the bullish price trend, as the 14-day RSI holds within a bullish regime and has not become oversold in more than a year.
On a relative basis, the NASDAQ 100 is holding above the breakout level as it continues to trade above the rising 50-day moving average.
The 10-Year Treasury Note broke through resistance at the $134 level that we have been highlighting, and promptly traded to the declining 200-day moving average which provided resistance yesterday. If holding 2019 highs truly marked a turning point for the 10-Year Note, we would expect to see the $134 level act as support to near-term pullback. Should that level break to the downside, look for the rising 50-day moving average to be reached.
The 14-day RSI is in bullish ranges and has room to overbought levels.
The Bloomberg Commodity Index remains in a near-term consolidation as it continues to work off the extremely overbought reading of the 14-day RSI in May. We do note that the RSI is holding bullish ranges. Thus far, the 50-day moving average is acting as support within the consolidation. The rising 200-day moving average remains well below current levels.
Drilling down on some of the key parts of the commodities which have been in focus of late:
- Copper – consolidating above support
- Gold – trying to stabilize, still in a year-long downtrend
- Lumber – bounce attempt from support
- Crude Oil – testing support at the breakout level
The CBOE S&P 500 Volatility Index (VIX) has seen an uptick over the past week as the S&P 500 has pulled back to the test the 50-day moving average. Spikes in the VIX continue to be short-lived, ending at lower levels each time. At the same time, we have yet to see the VIX retreat to the levels that marked extreme complacency in the 2017 – 2019 timeframe.
The CNN Fear & Greed Index moved to 20 yesterday, down from 35 last week, and is now at a level characterized as “Extreme Fear.” It is interesting to note that this level has been achieved with the S&P 500 less than 2% from record highs.
Equities are bouncing from support levels after a brief (thus far) pullback, as the 50-day moving average continues to define the trend for the S&P 500. We are watching the 10-Year Note closely, as holding the $134 breakout level will be key to the nascent uptrend. Despite the S&P 500 trading just off record levels, there is more fear than greed in the market.