Charting a ‘bull-trend’ pullback, S&P 500 retests the breakout point

The major U.S. benchmarks’ technical backdrop has strengthened in recent sessions, Tuesday’s soft start notwithstanding.

On a headline basis, the S&P 500 and Nasdaq Composite have sustained breaks atop key trendline resistance, placing each benchmark on firmer technical footing, and signaling a potential trend shift. A retest of first support is currently underway.

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












SPX, -0.68%










 hourly chart highlights the past two weeks.

As illustrated, the S&P has tagged next resistance (2,741) a level matching the bottom of the March gap. (See Friday’s review.)

Tactically, the 2,710 area marks first support, and is followed by a deeper floor matching the 2017 peak (2,695).

Meanwhile, the Dow Jones Industrial Average has edged atop major resistance.

The specific area matches the 2017 close and 2017 peak, also illustrated on the daily chart. A retest from above is underway early Tuesday.

Against this backdrop, the Nasdaq Composite has tagged nearly two-month highs, its best level since March 16.

In the process, it’s placed distance atop major resistance (7,295) matching a trendline, better illustrated below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has sustained a break atop trendline resistance and the April peak. This area broadly spans from 7,295 to 7,325 and pivots to support.

More broadly, the prevailing breakout neutralizes the formerly developing head-and-shoulders top defined by the January, March and April peaks.

Looking elsewhere, the Dow industrials’ backdrop remains constructive, but slightly softer.

To reiterate, the index is challenging major resistance matching the 2017 peak (24,876).

A sustained break higher would resolve a double bottom, defined by the March and May lows, placing the Dow in less-cluttered technical territory.

The marquee 25,000 mark also rests just slightly overhead.

Meanwhile, the S&P 500 has resolved a double bottom defined by the April and May lows.

First support (2,710) matches the breakout point, the April closing peak.

Delving deeper, a more important floor closely matches the 2017 close (2,763) and the 50-day moving average.

The bigger picture

Broadly speaking, the bigger-picture technical backdrop has strengthened in recent sessions.

On a headline basis, the S&P 500 and Nasdaq Composite have cleared important trendline resistance, placing each benchmark on firmer technical ground near two-month highs.

Moving to the small-caps, the iShares Russell 2000 ETF continues to challenge all-time highs.

In fact, Monday’s session high (160.69) marked a fractional record, by six cents.

Still, Monday’s close (159.23) registered comfortably under the small-cap benchmark’s record close (159.96).

To this point, the selling pressure near major resistance has been flat. The Russell 2000 ticked higher early Tuesday, even amid pronounced weakness elsewhere.

Meanwhile, the S&P MidCap 400 has sustained a break atop trendline resistance.

Tactically, support spans from 349.16 to 349.75, levels matching the 2017 peak and the breakout point.

Looking elsewhere, the SPDR Trust S&P 500 has extended its break atop major resistance.

To reiterate, near-term support (270.40) is followed by the 2017 peak (268.60).

Conversely, gap resistance (274.14) closely matches this week’s high (274.08) — at least so far.

Summing up the backdrop

Collectively, the market technicals have strengthened, and support a bullish-leaning intermediate-term bias.

The Russell 2000 is challenging all-time highs, while the S&P 500 and Nasdaq Composite have concurrently sustained recent breakouts.

To be sure, the prevailing rally attempt is less than picture-perfect, still fueled by lackluster volume, and tame breadth.

At the same time, the U.S. sub-sector backdrop has room to improve, though it has strengthened in key spots. For instance, the financials have edged atop major resistance early Tuesday amid rising Treasury yields.

Against this backdrop, price action trumps other indicators, and the recent price action registers as unusually bullish in the recent market context.

As it applies to the S&P 500, the index has resolved a double bottom, the “W” formation defined by the April and May lows.

First support matches the breakout point (2,710) and a retest is currently underway.

Delving deeper, more important support matches the 2017 close (2,673), and the S&P 500’s recovery attempt is intact barring a violation.

See also: S&P 500’s May rally attempt places major resistance under siege.

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 10-year Treasury note yield’s












TNX, +2.54%










 persistent strength has contributed to Tuesday’s early market downturn.

Consider that truly major overhead is currently under siege. Three levels stand out:

• The 2013 peak of 3.036.
• The 2014 peak of 3.034.
• The April peak, also the 2018 peak of 3.035.

Against this backdrop, Tuesday’s early session high (3.069) marks a nearly seven-year peak, the yield’s highest level since July 2011.

The upturn originates from the breakout point (2.94), the yield’s first notable floor, detailed previously.

Tactically, the 3.04 area marks a major inflection point. Tuesday’s close, and the next several sessions, should add color. On further strength, a near- to intermediate-term target projects to the 3.16 area.

Meanwhile, the United States Oil Fund












USO, +0.03%










 has sustained the May breakout, rising amid heightened geopolitical tensions, as well as signals of tightening supply. The fund tracks the price of West Texas Intermediate (WTI) light, sweet crude oil.

The prevailing upturn places the shares at two-year highs, punctuating consecutive bull flags pinned to the April rally. An intermediate-term target continues to project to 14.50.

Moving to U.S. sectors, the SPDR S&P Retail ETF is acting well even amid cross currents elsewhere.

Rising oil prices and interest rates conventionally present a headwind for the retailers.

Technically, the group has maintained trendline support, closely matching the 50-day moving average, rising to challenge three-month highs.

An eventual breakout would open the path to less-charted territory, and a likely retest of two-year highs matching the January peak.

Tactically, the 50-day moving average, currently 44.75, has marked an inflection point, and the group’s technical bias points higher barring a violation.

A strong monthly U.S. retail sales report released Tuesday has contributed to the group’s relative strength.

Initially profiled Aug. 5, 2016, Microsoft Corp.












MSFT, -1.03%










 has returned 69.1% and remains well positioned. (Yield = 1.7%.)

As illustrated, the shares have rallied to the range top, reaching a nominal all-time high.

The slight breakout places the shares in uncharted territory, though an intermediate-term target projects to the 107 area.

Tactically, the breakout point (97.00) is closely followed by the 50-day moving average, currently 93.75, and a posture higher supports a bullish bias.

Baidu, Inc.












BIDU, -0.97%










 is a large-cap Beijing-based Internet search provider.

The shares initially spiked three weeks ago, gapping atop the 50-day moving average after the company’s first-quarter results.

The subsequent follow-through places the shares in record territory, resolving a double bottom defined by the February and April lows.

More broadly, the shares are well positioned on the three-year chart, rising from a continuation pattern pinned to the steep 2017 rally. Tactically, the 260-to-268 area pivots to support, and Baidu’s path of least resistance points higher barring a violation.

Finally, Target Corp.












TGT, +1.18%










 is a large-cap retailer coming to life. (Yield = 3.5%.)

Technically, the shares have rallied from major support, knifing atop trendline resistance closely tracking the 50-day moving average. The strong-volume spike signals a trend shift.

Tactically, the trendline, circa 70.60, pivots to support, and the rally 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.