Charting a market divergence, Nasdaq violates the breakout point

Before detailing the U.S. markets’ wider view, the S&P 500’s
SPX,
-0.37%
 hourly chart highlights the past two weeks.

As illustrated, the S&P has extended its pullback from last week’s record high.

Against this backdrop, the index has ventured under its breakout point (3,870) early Tuesday.

Delving deeper, the ascending 50-day moving average, currently 3,796, is rising toward the 3,830 support.

Meanwhile, the Dow Jones Industrial Average
DJIA,
-0.16%
 has strengthened in recent sessions versus the other major benchmarks.

Tactically, recall that the breakout point (31,272) marks a notable floor.

Thursday’s session low (31,285) and Monday’s session low (31,286) registered nearby. Both downturns were punctuated by reversals to a tag nominal record high.

More immediately, the latest retest of the breakout point is underway early Tuesday.

Meanwhile, the Nasdaq Composite
COMP,
-1.45%
remains the weakest benchmark.

Consider that the index has extended its downturn from recent record highs, violating the breakout point (13,729).

Tactically, recall that the early-February gap (13,535) marks a deeper floor.

Monday’s close (13,533) effectively matched gap support, and the Nasdaq has followed through firmly lower early Tuesday.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has extended its late-month downturn.

Tactically, the breakdown point (13,729) pivots to resistance. The pending retest from underneath should be a useful bull-bear gauge.

Conversely, the ascending 50-day moving average, currently 13,243, is followed by the former breakout point (13,208).

Likely last-ditch support matches the 2020 peak (12,973), an area from which the prevailing upturn originates. An eventual violation would mark a “lower low” raising a technical caution flag.

Separately, recall the Nasdaq’s all-time high (14,175) — established last week — has registered slightly under its projected target in the 14,200 area. (See the Feb. 5 review.)

Looking elsewhere, the Dow Jones Industrial Average has maintained its breakout point (31,272).

In fact, two of the prior three session lows have registered slightly above support, price action also detailed on the hourly chart.

More broadly, the Dow’s prevailing flag-like pattern, near record highs, is technically constructive.

Meanwhile, the S&P 500 is challenging its first notable floor.

Here again, the specific area matches its breakout point (3,870). The S&P has ventured lower early Tuesday.

The bigger picture

As detailed above, a late-month technical divergence is currently taking shape.

Put differently, the big three U.S. benchmarks have diverged — each index is doing different things — for the first time since November. (Recall the Nasdaq’s November breakout lagged behind the other benchmarks as vaccine-fueled optimism deflated the stay-at-home trade amid a rotation toward more conventional portfolio positioning.)

Against this backdrop, the Dow Jones Industrial Average has maintained its breakout point (31,272), the S&P 500 is testing its breakout point (3,870) and the Nasdaq Composite has violated its corresponding breakout point (13,730).

More broadly, each benchmark’s intermediate-term bias remains bullish, based on today’s backdrop.

Moving to the small-caps, the iShares Russell 2000 ETF continues to digest the most decisive February breakout.

To reiterate, trendline support is closely followed by the breakout point (216.70).

Meanwhile, the SPDR S&P MidCap 400 ETF has also sustained an early-month break to record territory.

Tactically, recall that gap support, circa 453.10, is closely followed by the breakout point (451.50).

Combined, the tandem small- and mid-cap flag patterns — the orderly February ranges — are technically constructive.

Looking elsewhere, the SPDR Trust S&P 500 is also consolidating an early-month break to record highs.

Tactically, the breakout point (385.40) is followed by the former range top, circa 381.50.

Placing a finer point on the S&P 500, the index has ventured under its former range bottom.

Recall that consecutive weekly lows (3,885) matched the range bottom, an area that pivots to resistance.

More broadly, the S&P has extended its downturn, venturing under its breakout point (3,870) early Tuesday.

On further weakness, the ascending 50-day moving average, currently 3,796, is followed by the S&P’s former range bottom (3,750).

Delving deeper, likely last-ditch support points match the 3,723 area and the late-January low (3,694). An eventual violation would mark a material “lower low” — amid other issues — likely raising a technical caution flag.

Beyond technical levels, the S&P 500’s backdrop continues to support a bullish intermediate-term bias, though the prevailing downturn is worth tracking for potential acceleration.

Also see: Charting bull-flag breakout attempts: S&P 500, Nasdaq tag record territory.

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 Energy Select Sector SPDR
XLE,
+1.36%
 is acting well technically.

As illustrated, the group has extended its uptrend, reaching nearly 52-week highs, the best level since March 3, 2020.

The prevailing upturn originates from support roughly matching the 50-day moving average and the mid-2020 range top. A near-term target continues to project to the 50 area.

Conversely, a near-term floor matches the June peak (46.88) and is followed by the firmer breakout point (45.00).

More broadly, the energy sector’s recent surge dovetails with the transports prevailing breakout, as well as an airlines breakout. The prevailing sub-sector price action is consistent with a reflation trade, an expected return to the pre-virus economic backdrop.

Similarly, the SPDR S&P Metals & Mining ETF is coming to life.

Technically, the group has tagged 32-month highs, clearing resistance matching the January peak. The upturn has been fueled by a volume spike, laying the groundwork for potentially more decisive follow-through.

Tactically, the 50-day moving average has marked an inflection point and is rising toward the breakout point (37.70). The prevailing uptrend is firmly-intact barring a violation.

Initially profiled March 27, Apple, Inc.
AAPL,
-1.02%
 has returned 95.1%.

Against this backdrop, a potentially consequential technical test — detailed last week — is currently in play.

To start, the shares are challenging the late-2020 breakout point (125.40), an area matching the October peak.

Separately, the 100-day moving average, currently 124.70, has defined Apple’s recent trend. The shares have not closed under the 100-day average since April, amid the worst of the virus-fueled carnage.

So combined, the 124.70-to-125.40 area remains a bull-bear inflection point. Apple has ventured under support early Tuesday, though as always, it’s the session close that matters. (As well as the next several sessions, potentially.)

Tactically, an eventual violation would mark a “lower low” — combined with a violation of the trending indicator — raising a technical question mark.

Conversely, a reversal atop near-term resistance (130.20) and the 50-day moving average would place Apple on firmer technical ground. (Also see the Feb. 19 review.)

Looking elsewhere, Nucor Corp.
NUE,
+1.47%
 is a well positioned large-cap steel producer. (Yield = 2.7%.)

As illustrated, the shares have knifed to two-year highs, rising amid a sustained volume increase.

Underlying the upturn, its relative strength index (not illustrated) has registered its best levels since 2018, improving the chances of longer-term follow-through.

More broadly, the shares are well positioned on the three-year chart, clearing resistance matching the late-2019 range top (58.70).

Tactically, the 50.00-to-58.70 area marks a notable floor. A sustained posture higher signals a comfortably bullish bias.

Finally, Signet Jewelers Limited
SIG,
-0.30%
 is a well positioned mid-cap specialty retailer.

As illustrated, the shares have knifed to two-year highs from the February range, rising amid a volume uptick.

Tactically, the breakout point (45.85) is followed by the 20-day moving average, currently 43.25, a level that has underpinned the recent trend. The prevailing uptrend 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.