Charting a bullish reversal, S&P 500 spikes from major support (2,742)

Technically speaking, the S&P 500 has reversed sharply from one-month lows, punctuating a successful test of major support (2,742).

In the process, the S&P has rallied toward its fourth retest of the range top — the 2,802-to-2,817 area — and major resistance is frequently cleared on the third or fourth approach. The pending retest from underneath will likely add color.

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














SPX, +0.41%












 hourly chart highlights the past two weeks.

As illustrated, the S&P has narrowly maintained major support (2,742).

Last week’s close (2,743) registered just above support, and the S&P has reversed sharply, reclaiming the 200-day moving average. Constructive price action.

Similarly, the Dow Jones Industrial Average has rallied from one-month lows.

To be sure, the Dow’s reversal registers as less decisive, as the index has been weighed down amid Boeing’s ugly downdraft. (The Dow Jones Industrial Average is a price-weighted index, meaning that higher-priced components carry a greater weight. Boeing is the highest-priced of the 30 Dow components, making it the most influential.)

Still, the Dow has thus far maintained notable support matching the June peak (25,402) on a closing basis.

Against this backdrop, the Nasdaq Composite














COMP, +0.62%












 has reversed sharply from the March low.

In the process, the index has reclaimed its breakdown point (7,486) a level closely matching the 200-day moving average, currently 7,482. Both areas are also illustrated below.

On further strength, the February peak (7,602) marks an inflection point.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has absorbed the March downturn. This week’s swift reversal places the index on firmer technical ground, atop the breakdown point (7,486) and the 200-day moving average.

Consider that if a downtrend were in play, the 7,480 area “should have” capped the rally attempt. The nearly immediate reversal higher supports a bullish intermediate-term bias.

Looking elsewhere, the Dow Jones Industrial Average has rallied less impressively from the March low.

Still, the index has maintained an inflection point matching the June peak, circa 25,400. (The Dow has also sustained a posture atop the 200-day moving average throughout the March downturn, unlike the S&P 500 and the Nasdaq.)

Tactically, recall that a rally to the former range — atop resistance at 25,762 and 25,820 — would neutralize the March downdraft.

Meanwhile, the S&P 500 has narrowly maintained major support (2,742).

To reiterate, last week’s close (2,743) — also the March closing low — registered just above the inflection point. The subsequent sharp rally punctuates a successful retest.

The bigger picture

Collectively, the U.S. benchmarks’ bigger-picture backdrop supports a bullish near- to intermediate-term bias.

On a headline basis, the S&P 500 has maintained major support (2,742) — though narrowly — while the Nasdaq Composite has rallied sharply back atop its breakdown point (7,486). Both areas roughly match the 200-day moving average, a widely-tracked primary trending indicator.

More plainly, the major U.S. benchmarks have weathered a respectable March downturn, rising sharply from one-month lows. Bullish price action.

Moving to the small-caps, the iShares Russell 2000 ETF has also rallied from one-month lows.

Tactically, the 153.60-to-154.50 area pivots to resistance, detailed previously. The prevailing retest from underneath will likely add color.

Meanwhile, the SPDR S&P MidCap 400 has rallied from the March low amid increased volume.

In its case, resistance broadly spans from about 345.50 to the 200-day moving average, currently 247.22.

Against this backdrop, the SPDR Trust S&P 500














SPY, +0.45%












 has rallied to its former range.

Tactically, the 200-day moving average, currently 374.90, remains an inflection point.

Recall that last week’s close marked the SPY’s lone close under the 200-day since Feb. 11. The SPY has reversed sharply back atop the trending indicator.

Placing a finer point on the S&P 500, the index has rallied respectably from familiar support (2,742).

To reiterate, last week’s close (2,743) matched the floor, and this week’s sharp rally punctuates a successful retest. Constructive price action.

More immediately, notable resistance spans from 2,802 to 2,817, an area defining the range top. The pending retest from underneath will likely add color.

As always, the chances of a breakout improve to the extent the S&P holds tightly to resistance. (Last week’s high matched the range top, almost to the decimal, and the S&P subsequently pulled in respectably.)

More broadly, the prevailing upturn marks the S&P’s fourth retest of the range top, and major resistance is frequently cleared on the third or fourth independent approach. The pending retest should be a useful bull-bear gauge.

Beyond technical levels, the S&P 500 has narrowly weathered its deepest year-to-date pullback, largely without consequence in the broad sweep. The S&P 500’s intermediate-term bias remains bullish, based on today’s backdrop, pending a more aggressive market downturn.

See also: Charting a bull-trend pullback: S&P 500 absorbs March shot across the bow.

See also: Charting a V-shaped reversal, S&P 500 hesitates at major resistance.

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 Invesco QQQ Trust














QQQ, +0.70%












 has absorbed the March downturn.

The swift reversal from one-month lows places the range top under siege. Two inflection points stand out:

• Resistance matching the November peak of 175.58.
• Resistance matching the March peak of 175.79.

As always, the chances of a breakout improve to the extent the shares hold tightly to the range top. A near-term target projects to the 182 area on follow-through.

Conversely, the 200-day moving average (172.35) pivots to support, and is closely followed by the top of this week’s gap (171.85). A breakout attempt is in play barring a violation.

Profiled Feb. 21, Cisco Systems, Inc.














CSCO, +0.30%












 has added 4.6% and remains well positioned. (Yield = 2.7%.)

The shares initially spiked three weeks ago, gapping atop trendline resistance after the company’s second-quarter results.

The subsequent tight March range — amid a volatile market — positions the shares to build on the steep February rally. Tactically, the range bottom (50.50) is closely followed by the breakout point (49.40) and the rally attempt is intact barring a violation.

Synopsis, Inc.














SNPS, +1.56%












 is a large-cap developer of electronic design automation software products.

As illustrated, the shares have reached record territory, clearing resistance matching the September peak.

The upturn comes from a tight one-month range — a coiled spring — laying the groundwork for potentially more decisive follow-through. Tactically, the breakout point, circa 103.50, pivots to well-defined support.

Looking elsewhere, Foot Locker, Inc.














FL, -0.18%












 is a well positioned large-cap retailer. (Yield = 2.4%.)

Earlier this month, the shares gapped to 21-month highs, rising after the company’s fourth-quarter results.

The ensuing pullback has filled the gap, placing the shares at an attractive entry 13.6% under the March peak. Tactically, the 50-day moving average is rising toward the breakout point (58.40) and a posture higher supports a bullish bias.

Finally, J. Jill, Inc.














JILL, -1.08%












 is a small-cap retailer coming to life.

Technically, the shares have recently staged a strong-volume breakout, tagging six-month highs after the company’s quarterly results.

The breakout resolves an inverse head-and-shoulders pattern defined by the October, December and February lows. Tactically, the neckline closely matches the 200-day moving average, currently 6.57, 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.

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