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Take-Aways:

The bulls have failed to defend the key levels that we highlighted in this note last week. At the same time, momentum has failed to hold in a bullish regime. The door is now open for the June lows to be retested. Should the bulls manage a counterattack, we want to see the indexes regain the 50-day moving averages before even considering the bull case. Especially with volatility still elevated. Away from stocks, Treasuries remain under pressure, and Commodities are testing a key short-term support level.

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Mid-Week Market Update – United States

The S&P 500 now sits below the 50 and 200-day moving averages and the 4,000 level. While the move above 4,100 was a reason to become incrementally bullish, below these levels negates that bullishness, especially with the 14-day RSI moving below 40. Support comes into play near the June lows.

The S&P Small Cap 600 is below the 50 and 200-day moving averages. The 14-day RSI has moved below 40. Here too, the incremental bullishness of the summer rally has been negated. Investors must be open to the possibility that the June lows will be tested.

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

The NASDAQ 100 completes the bearish trifecta for the major U.S. averages, trading below the 50 and 200-day moving averages with room to the June lows. Momentum is with the bears as the 14-day RSI has crossed below 40.

The relative trend remains bearish below the 50-day moving average.

The 10-Year Note remains under pressure, trading below the 2018 lows, the flat 50-day moving average, and the steadily declining 200-day moving average. The best-case scenario is that a base is built. However, we find the bullish case difficult to make until 121 is broken to the upside. The 14-day RSI has a bearish tilt below the 40 level.

While we have been giving the benefit of the doubt to the bulls within the commodity space, we do keep an open mind that is free of dogma. The Bloomberg Commodity Index is testing near-term support and the moving averages. A break below 117 would open the door to more important support near 106. The bulls want to see the RSI hold here at 40.

The relative trend is above support and the 50-day moving average, keeping odds in favor of outperformance.

Sentiment/Volatility Check

The past week has not given volatility much of a reason to subside. The CBOE S&P 500 Volatility Index (VIX) continues to move higher and remains above the rising 10-day moving average. Bulls want to see the VIX consistently below 20 in order to have confidence that rallies can be maintained.

ATRs have continued to move higher over the past week as equities remain under pressure. While all three time-frames remain below 2%, we note that the 21 and 63-day metrics are above support. The 126-day ATR has yet to break the trend from the November 2021 lows and is now moving to the upside again.

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