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Take-Aways:

Equity indexes have experienced impressive rallies over the prior two weeks of trading as both the VIX and realized volatility materially turned lower, providing a potential tailwind for the recent strength. Bonds have not been left out of the rally, but it’s likely still too early for the bond bulls to cheer. Finally, Commodities continue their consolidation at an important support zone as momentum within the space potentially builds energy for a directional move.

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Mid-Week Market Update: United States

The S&P 500 continues its rally from 3,630 support with 3,900, and the 50-day moving average set in its sights to the upside. So far, the price action can likely be interpreted as a countertrend rally. Above 3,900 and the 50-day moving average, the bear case begins to weaken. Note RSI has broken out into a bullish regime, setting the table for the bulls. We are watching this zone closely.

High Beta / Low Volatility chart for March 25th research.

The S&P 600 has rallied through the declining 50-day moving average from below after a continued upside move from long-term support at the 1,100 zone. Should the index remain above the 50-day moving average, the 200-day moving average comes into play around the 1,200 mark. Note that RSI has yet to break out of the 60 zone to the upside, a level that has stalled previous rallies.

Relative to the S&P 500, the group is fighting with both the breakout level and the ratio’s 50-day moving average. Prudence suggests waiting for further directional bias at these levels.

Discretionary / Staples (EW) chart for March 25th research.

The NASDAQ 100 has not been left out of the equity rally, although the price action has been arguably the least spectacular of the three indexes. There is room for an attack on the 50-day moving average from below – however, bulls want to see RSI break the 60 mark that stalled prior rallies.

Relative to the S&P 500, the NASDAQ 100 continues its consolidation at relative support at the early summer relative lows as investors wait for further directional bias.

Lumber / Gold chart for March 25th research.

The 10-Year Treasury Note has rallied to the underside of short-term resistance at the 110 zone below declining 50 and 200-day moving averages over the past week of trading. Should this zone give way to the upside, there is room for a continued countertrend move to the 50-day moving average and the 114 zone. While bond bulls have taken notice this week, they want to see RSI break out of the 45 mark to the upside to have confidence in a continued countertrend rally.

Copper / Gold chart for March 25th research.

The Bloomberg Commodity Index continues to consolidate at 111 support below the 50 and 200-day moving averages on a series of lower highs since early summer. While the price action has been lackluster for the bulls, the key long-term zone remains at 106. Much like price, RSI consolidates on a series of lower highs and higher lows as momentum becomes compressed, potentially building energy for a directional move.

Relative to the S&P 500, the group has faltered at relative resistance and now trades below the ratio’s rising 50-day moving average. These are two key zones that the bulls want to see recaptured in order to put the ball back in their court on a relative basis.

Small Caps / Large Caps chart for March 25th research.

The CBOE S&P 500 Volatility Index (VIX) made a new one-month low in the October 25th trading session as the index’s 10-day moving average turned materially to the downside for the first time since late June of this year. While similar price action played out in early September, equity bulls want to see a sustained move lower in this index.

Growth vs Value (Large Cap) chart for March 25th research.

Realized volatility via ATRs across one, three, and six-month timeframes have begun to pull back to their long-term uptrends at the highlighted zones. While these are encouraging developments, bulls want to see these uptrends broken to the downside. For now, they remain intact.

Growth vs Value (Large Cap) chart for March 25th research.

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