The Trend Is Up for Grabs,
Who Is Going to Take It?

by | Mar 23, 2022

Key Points

  • S&P 500 Fights Back to a Neutral Position
  • Small Caps are at Their Old Familiar Place
  • NASDAQ 100 Rallies, Still Has Work to Do
  • Commodities Pause, the Trend Is Still Bullish
  • Sentiment Is Less Fearful After Stocks Rally

Mid-Week Market Update – United States

The S&P 500 has staged a strong rally from support near 4,200 to regain the 50-day moving average and the 4,400 level, moving into a more neutral position. Breaking above the 100-day moving average and the February peaks could signal that the trend is back in the hands of the bulls. The 14-day RSI has broken its downtrend and is now trying to exit the bearish regime.

The S&P 600 has also staged a rally from support to regain the 50-day moving average but remains below the 100-day moving average. The net effect is that the index is back in the middle of the consolidation that has been in place for more than a year. The 14-day RSI is in a neutral position as it tries to exit a bearish regime.

Relative to the S&P 500, Small Caps continue to stall and are now testing support at the 50-day moving average. We have made the case that breaking the October/November peaks may point to further outperformance, but that goal has remained elusive thus far.

The NASDAQ 100 Index has used the cluster of support near 13,000 that we highlighted last week to rebound through the 50-day moving average and the 14,000, moving into a neutral position. Retaking the 100-day moving average would further solidify this view. The 14-day RSI is testing the top end of the bearish regime. Breaking above as price continues to rise would add to the bull case.

However, the relative trend remains bearish below the declining 50-day moving average. There is still a lot of work to do here.

The 10-Year Note continues to fall, sending yields higher. Price remains below the declining 50 and 100-day moving averages as it tries to find a floor on which to begin the base-building process.

The 14-day RSI has moved back into an oversold position, lending momentum confirmation to the bearish price action.

The pause in the rally for the Bloomberg Commodity Index has accomplished two things. It has allowed us to establish a new, short-term support level near 120, and it has allowed the 14-day RSI to work off an extremely overbought position. The index remains above the rising 50 and 100-day moving averages, keeping the bulls in control of the trend.

Sentiment Check

The CBOE S&P 500 Volatility Index (VIX) continues to move lower as equities rise. The 10-day moving average has also taken a turn to the downside. The easing of volatility removes this sentiment tailwind from the market, but we do note that both the index and moving average continue to make higher lows and higher highs.

The CNN Fear & Greed Index currently stands at 44, up from 19 last week, and is now in a “fear” position.  

Take-Aways:

The countertrend rally that we highlighted for equities last week has taken the U.S. averages into neutral positions. Will the bulls or the bears take control of the trend from here? It remains an open question. We want to see the 100-day moving averages broken to the upside to become incrementally bullish. Away from equities, treasuries remain in freefall, groping desperately for a floor. Commodities are pausing within in an ongoing uptrend. Finally, the sentiment still has a bearish tilt but is no longer at an extreme that calls for taking a contrarian view.

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