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Key Points

  • S&P 500 Remain with a Bearish Trend
  • Small Caps and the NASDAQ are Also Bearish, Inline Performers
  • Treasuries Hold the Line at the 2018 Lows
  • The Commodity Trend is Short-term Bearish, Long-term Bullish
  • Volatility Remains Elevated Across Time Frames

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Mid-Week Market Update – United States

The S&P 500 continues to hold below the 50 and 100-day moving averages as well as price-based resistance in the 3,900 – 4,000 range. Below these levels, the bears retain control, keeping the door open to a move toward the pre-COVID high near 3,400.

Momentum confirms the price action as the 14-day RSI sits in a bearish regime.

The S&P Small Cap 600 remains below the declining 50 and 100-day moving averages, a similar price structure to what is seen in the S&P 500. Support near the pre-COVID highs is near the 1,040 level. Here too, momentum is in a bearish regime, confirming the weak price trend.

The relative trend is still neutral, dancing with the 50-day moving average while holding below the key October/November peaks.

The NASDAQ 100 completes the trifecta of U.S. averages trading below their declining 50 and 100-day moving averages as a recent rally attempt was stopped by the former. There is room for the pre-COVID peak, which could be in play if 11,000 gives way. The 14-day RSI continues to make lower highs as it trades in a bearish regime.

The relative trend is still trying to stabilize, recently taking out the 50-day moving average from below. However, more time is needed before we can claim that the trend is turning bullish.

The 10-Year Note is fighting hard to build a base after reclaiming the 2018 lows. The Note has been testing the declining 50-day moving average while holding below the declining 100-day moving average. It is still early in the base-building process, and we note that recent rallies have ended at lower highs, keeping the downtrend in place.

The 14-day RSI has rebounded from oversold levels but is holding in a bearish regime.

The Bloomberg Commodity Index remains below the 50 and 100-day moving averages, and the 50-day is moving still moving lower. The recent weakness produced an oversold condition for the 14-day RSI for the first time in 2022. We continue to see support near the 106 level. Above this mark, the long-term trend is still in place.

The relative trend remains below the recently broken 50-day moving average, which has shifted from rising to flat.

Sentiment Check

The CBOE S&P 500 Volatility Index (VIX) is holding below 30 and its 10-day moving average. The Index remains elevated, and the linear regression line points to a still-rising trend. We are still intrigued by the fact that recent spikes have culminated at lower levels, but sustained suppression of volatility continues to be elusive. At the same time, the VIX has not reached levels to the upside that call for a contrarian bullish case to be made.

Looking at ATRs across timeframes, we can see that volatility remains elevated, with average moves near or greater than 2% per day. Should these rising trends persist, investors should be open to the idea that the S&P 500 could test the pre-COVID highs.

Take-Aways:

Equities in the U.S. retain their bearish trends, with all three major averages below declining 50 and 100-day moving averages. This dynamic keeps the door open to a test of the pre-COVID highs. The 10-Year Note appears to be in the early stages of a base-building process, holding at the 2018 lows. Commodities are still under pressure in the near term, but the longer-term bullish trend is still in place for now. Today’s CPI report could serve as a catalyst for markets, especially in fixed income and commodities.

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