The major indexes in the U.S. remain below their 50 and 200-day moving averages. If this remains the case, there are higher odds that stocks will follow the 10-Year Note in testing/breaking the June lows. This idea is strengthened by the fact that volatility in market remains elevated as the VIX spent most of 2022 above the 20-level. Commodities now face a key test as they trade below the moving averages but above support.

Mid-Week Market Update – United States

The S&P 500 continues to trade below the 50 and 200-day moving averages, keeping the threat of a retest of the June lows on the table. Yesterday’s weakness pushed the 14-day RSI below the 40-level. Should it reach 30 or less, we would have confirmation that momentum is with the bearish price trend.

Likewise, the S&P Small Cap 600 remains below its 50 and 200-day moving averages. Support comes into the play at the June lows, near 1,100. The 14-day RSI is testing the 40 level, a break of which could lead to a move toward 30 and confirmation of the bearish price trend.

The relative trend remains neutral, fighting with the 50-day moving average. However there is now a slight downside bias as recent peaks have culminated in lower highs.

The NASDAQ 100 is also below its 50 and 200-day moving averages, putting a test of the June lows on the table. The 14-day RSI is in the process of undercutting 40, setting the stage for a return of downside momentum.

Relative to the S&P 500, the NASDAQ 100 remains below the 50-day moving average in the downtrend that began in November.

The 10-Year Treasury Note has broken below the June lows as the precipitous decline continues. The Note is well below the declining 50 and 200-day moving averages. At the same time, the 14-day RSI has moved into an oversold position, confirming the bearish price trend.

The Bloomberg Commodity Index closed below the 50 and 200-day moving averages. At best we can call trading since March a consolidation after a strong rally. At worst, it can be classified as a trend reversal. The support zone between 106 and 110 is the last line of defense for bulls on the space. For now, the 14-day RSI is holding above 40, in a bullish regime.

The relative trend is above support and the 50-day moving average, keeping odds in favor of outperformance. However, it is important to remember that outperformance could mean down less.

Sentiment/Volatility Check

The CBOE S&P 500 Volatility Index (VIX) remains above its 10-day moving average, trading in line with levels that we highlighted in last week’s note. As has been the trend for much of 2022, the VIX continues to trade at elevated levels relative to what would be more conducive to sustainable bullish trends in equity markets.

ATRs remain elevated across timeframes as well. The short and intermediate-term metrics are holding above key support levels. The longer-term metric remains in a steady uptrend from the November lows.

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