Charting a bull-bear battleground: S&P 500, Nasdaq nail major resistance


Technically speaking, the U.S. benchmarks’ most firmly-grounded rally attempt since October has reached its first significant hurdle.

On a headline basis, the S&P 500 and Nasdaq Composite have rallied to challenge major resistance — S&P 2,581 and Nasdaq 6,903 respectively — and the prevailing retest from underneath will likely offer a useful bull-bear gauge.

Before detailing the U.S. markets’ wider view, the S&P 500’s

SPX, +0.50%

 hourly chart highlights the past two weeks.

As illustrated, the S&P has extended its break from the former range top (2,520).

Its next notable resistance matches the early-2018 closing low (2,581), detailed repeatedly. Tuesday’s early session high (2,579.8) has closely matched resistance, and the retest remains underway.

Meanwhile, the Dow Jones Industrial Average has also extended its recovery attempt.

Consider that Monday’s close (23,531.35) almost precisely matched an inflection point at the May low (23,531.31), detailed previously.

Though additional overhead is limited from current levels, an inflection point matches the early-December low (23,881).

Against this backdrop, the Nasdaq Composite

COMP, +0.57%

 has broken more decisively from its former range.

The upturn places significant resistance (6,903) within view, an area better illustrated on the daily chart below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has extended its rally from 16-month lows.

As detailed repeatedly, its first significant resistance rests at the breakdown point, an area closely matching the 2017 close (6,903).

Tuesday’s early session high (6,909) has roughly matched resistance, and initially drawn selling pressure. This area remains a useful bull-bear gauge.

Looking elsewhere, the Dow Jones Industrial Average has also extended a rally from 16-month lows.

Its breakdown point closely matches the June low (23,997) and remains slightly more distant from current levels. An eventual close higher would mark technical progress.

Meanwhile, the S&P 500 has reversed from 20-month lows, its worst levels since April 2017.

To reiterate, notable resistance matches the early-2018 closing low (2,581) a level observed twice, at the February and April lows. Tuesday’s early session high (2,579.8) has matched resistance.

The bigger picture

Technically speaking, the U.S. benchmarks’ most firmly-grounded rally attempt since October has reached its first major technical test.

On a headline basis, the S&P 500 and Nasdaq Composite are retesting first resistance early Tuesday, areas illustrated on the daily chart — S&P 2,581 and Nasdaq 6,903 respectively.

Both benchmarks have initially drawn selling pressure, though the session close, and the next several sessions, may add color.

Moving to the small-caps, the iShares Russell 2000 ETF

IWM, +1.12%

 has also extended a respectable rally attempt.

To reiterate its next notable overhead spans from 141.45 to 142.77, an area matching the early-December lows.

Similarly, the SPDR S&P MidCap 400 has extended its rally from 25-month lows.

Recall that the MDY’s initial reversal off the December low was fueled by a sustained volume increase.

Looking elsewhere, the SPDR Trust S&P 500

SPY, +0.44%

 has rallied from 20-month lows.

Tactically, former resistance pivots to support, an area spanning from 251.20 to 251.40.

Conversely, major overhead spans from 258.62 to 259.85, levels matching the October and December lows.

Returning to the SPY’s three-year view adds perspective. Each bar on the chart above represents one week.

On this wider view, the December downdraft resolved a massive double top — defined by the January and October peaks — and punctuated a failed retest of trendline resistance from underneath. The tandem downturns were fueled by sustained volume spikes.

Recall that the breakdown point spans from about 258.50 to 259.85, an area matching resistance on the daily chart, though for partly different reasons. The SPY’s intermediate- to longer-term bias remains bearish pending a close atop resistance, though the pending retest from underneath should be a genuinely useful bull-bear gauge.

Summing up the backdrop

All told, the U.S. benchmarks’ near-term rally attempt is intact, and marks the most firmly-grounded upturn since the initial October breakdown.

Perhaps most notably, the rally attempt is underpinned by tandem 20-to-1 up days registered across precisely seven sessions — the Dec. 26 and Jan. 4 sessions. These represent textbook bullish internals, as detailed in Monday’s review.

Meanwhile, market sentiment has also recently registered extremes consistent with intermediate-term market lows.

So combined, market sentiment and the prevailing internal statistics support the bull case. This is a respectable market recovery attempt.

Still, the prevailing sticking point remains price action, and price action is the most important element.

When gauging price action, familiar S&P 500 resistance stands out:

  • Major overhead matching the breakdown point (2,581) an area that capped the mid-December Fed-induced downdraft.
  • The 20-month moving average, currently 2,620.
  • Resistance matching the November low of 2,631.
  • The descending 50-day moving average, currently 2,640.

As detailed repeatedly, the pending retest of these areas from underneath should add color. A close higher would signal waning bearish momentum, strengthening the bull case.

More broadly, the prevailing rally attempt has strengthened — supporting a bullish near-term bias — though the S&P 500’s intermediate- to longer-term trends remain bearish pending follow-through.

See also: Charting a falling-knife backdrop, S&P 500 confirms primary downtrend.

Tuesday’s Watch List

The charts below detail names that are technically well positioned. These are radar screen names — sectors or stocks poised to move in the near term. For the original comments on the stocks below, see The Technical Indicator Library.

Drilling down further, the U.S. dollar has extended its pullback from 20-month highs, pressured amid plunging Treasury yields.

In the process, the Invesco U.S. Dollar Bullish ETF has ventured under major support to start 2019, areas detailed last week. Four inflection points stand out:

  • Trendline support, circa 25.55.
  • The 100-day moving average, currently 25.52.
  • The breakout point, circa 25.50.
  • The December low of 25.45

Against this backdrop, Monday’s close (25.35) registered under support, raising the flag to an intermediate-term trend shift. The 25.50 area pivots to resistance, and the pending retest from underneath should add color.

To the extent the downturn is sustained, the softer dollar presents a broad-market tailwind.

Moving to U.S. sectors, the VanEck Vectors Semiconductor ETF

SMH, -1.28%

 has reached a notable test.

Specifically, the group has reversed from 20-month lows, rising to retest the breakdown point (88.00). On further strength, trendline resistance, circa 89, is followed by the 50-day moving average, currently 91.25.

The group’s prevailing backdrop supports a bearish intermediate-term bias pending follow-through. Sill, the response to this area, across the next several sessions, should be a useful bull-bear gauge.

Moving to specific names, RingCentral, Inc.

RNG, +1.14%

 is a large-cap provider of software-as-a-service solutions.

Technically, the shares are rising from a head-and-shoulders bottom defined by the October, November and December lows. The January upturn originates from a successful test of the 50- and 200-day moving averages.

This is a high-reliability reversal pattern, and would be resolved with a close atop the neckline, circa 87. A breakout likely opens the path to an eventual retest of the record high (98.15).

Public since March 2017, Alteryx, Inc.

AYX, -2.25%

 is a mid-cap data-analytics software vendor.

As illustrated, the shares have weathered the late-2018 market volatility, maintaining a posture atop the 200-day moving average. (Also, for the most part, the 50-day moving average.)

The prevailing upturn resolves a double bottom — defined by the November and December lows — a pattern punctuated by Monday’s record close. Tactically, a near-term floor matches the breakout point (64.40) and a posture higher supports a bullish bias.

Finally, Pioneer Natural Resources Co.

PXD, +0.53%

 is a large-cap oil and gas name coming to life.

Technically, the shares have cleared trendline resistance, rising to challenge the breakdown point (142.20).

Underlying the upturn, the relative strength index (not illustrated) has registered nearly three-month highs — but remains in neutral territory — improving the chances of incremental follow-through.

Tactically, the trendline closely matches the 20-day moving average, circa 137, and the recovery attempt is intact barring a violation.

Still well positioned

The table below includes names recently profiled in The Technical Indicator that remain well positioned. For the original comments, see The Technical Indicator Library.

Company Symbol Date Profiled
Netflix, Inc. NFLX Jan. 7
iShares Brazil ETF EWZ Jan. 7
Ciena Corp. CIEN Jan. 7
Crox, Inc. CROX Jan. 7
IAC/InterActivecorp IAC Jan. 7
Five9, Inc. FIVN Dec. 13
Ambarella, Inc. AMBA Dec. 11
Tech Data Corp. TECD Dec. 11
SPDR Gold Shares ETF GLD Dec. 10
VanEck Vectors Gold Miners ETF GDX Dec. 10
Workday, Inc. WDAY Dec. 10
Atlassian Corp. TEAM Dec. 10
Berry Global Group, Inc. BERY Nov. 26
Ventas, Inc. VTR Nov. 26
Ubiquiti Networks, Inc. UBNT Nov. 13
TripAdvisor, Inc. TRIP Nov. 13
Welltower, Inc. WELL Nov. 12
Xilinx, Inc. XLNX Nov. 12
Fabrinet FN Nov. 12
Acacia Communications, Inc. ACIA Nov. 7
Starbucks Corp. SBUX Nov. 5
American Tower Corp. AMT Nov. 5
Mellanox Technologies, Ltd. MLNX Nov. 1
Coca-Cola Co. KO Oct. 31
Utilities Select Sector SPDR XLU Oct. 25
McDonald’s Corp. MCD Oct. 24
Church & Dwight Co. CHD Oct. 22
Spirit Airlines, Inc. SAVE Oct. 19
Yum! Brands, Inc. YUM Oct. 18
Eli Lilly & Co. LLY Oct. 17
CME Group, Inc. CME Oct. 8
Verizon Communications, Inc. VZ Sept. 13
Clorox Co. CLX Aug. 10
Pfizer, Inc. PFE July 25
Merck & Co., Inc. MRK June 21
Twilio, Inc. TWLO May 21

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Source : MTV