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Key Points

  • S&P 500 Tests Support Again
  • NASDAQ 100 Is Losing Relative Strength
  • Small Caps Continue Their Cruel Joke
  • Commodities Remain Under Pressure as the Dollar Moves Higher
  • Sentiment Is Fearful

Mid-Week Market Update – United States

The S&P 500 started this week under pressure but remained above the rising 50 and 100-day moving averages. Importantly, key short-term support levels are also intact at 4,630 and 4,550. Above these marks, the bulls are in the top position. However, we must wonder if it makes sense to be aggressive with the 14-day RSI leaving another lower high on the chart despite the index closing at a record weekly high on Friday.

The long, strange trip continues to for the S&P Small Cap 600, which is moving toward the bottom of the consolidation after a false breakout. The index is putting up a fight near the 50 and 100-day moving averages but remains below them, closing near the lows of the day yesterday. The 14-day RSI did not leave the bearish regime on a recent rebound attempt and is moving lower once again.

The relative trend is bearish, below the 50-day moving average, resistance, and trades near the lows of the year.

If there was ever a spot for the NASDAQ 100 to start to fight off its back, this is it. The index has sustained much of the selling pressure this week, closing at its low on Monday and gapping lower yesterday. Support at the 15,800 level remains key, as do the rising 50 and 100-day moving averages. At the same time, the 14-day RSI is testing 40, trying to hold a bullish regime.

On a relative basis, there has been some short-term damage done this week, with the ratio closing below support and the 50-day moving average. The bulls want to see a rebound begin to take hold soon.

The 10-Year Note continues to trade below the declining 50 and 100-day moving averages and broken support (now resistance). It is hard to make a bullish case, until these levels are overcome. However, the 14-day RSI continues to carve out higher lows, a sign that the Note may continue to build a base from which a move to the upside can take hold.

As we noted last week, the rebound attempt in the Bloomberg Commodity Index was not very compelling. The index remains below the 50 and 100-day moving averages and broken support. The 14-day RSI is moving lower and is now in a bearish regime.

The relative trend remains under pressure and is on the verge of testing the 2021 lows.

As commodities remain under pressure, the U.S. Dollar Index appears to be ready for its next leg higher after a short consolidation. The DXY is above the rising 50 and 100-day moving averages and the key 94.50 breakout level. The RSI is in a bullish regime, confirming price and increasing of continuing the uptrend.

Sentiment Check

The CBOE Volatility Index (VIX) is holding above 20 as investors remain somewhat uneasy despite the S&P 500 trading near record highs. Perhaps this has more to do with the damage that has been taking place below the market’s surface for most of this year. To have confidence that stocks will work higher into the end of the year, we want to see the VIX below 20.

Due to a glitch in the chart, there is no picture this week. However, the CNN Fear & Greed Index moved to 26 this week from 35 last week and remained in a “fear” position.

 

Take-Aways:

Equity Index bulls in the NASDAQ 100 and S&P 500 retain the benefit of the doubt for now, but the lines in the sand are clear. After an eight-month consolidation, the S&P 600 played a cruel joke on investors, failing to hold the breakout. The chef’s kiss would be for it to break down, but that has not played out yet. Commodities are under pressure, and the Dollar is rising, a sign that risk appetite in the market is waning.

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.