Charting a range-bound backdrop, S&P 500 weathers May trade-fueled volatility

Technically speaking, the major U.S. benchmarks continue to whipsaw amid increased, and largely trade-fueled, May market volatility.

Amid the cross currents, the bigger-picture technical damage has thus far been largely contained, with each big three U.S. benchmark maintaining major support.

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












SPX, +0.83%










 hourly chart highlights the past two weeks.

As illustrated, the S&P is traversing a jagged May range, vacillating amid each day’s trade-related developments.

Tactically, the 50-day moving average, currently 2,872, is followed by notable overhead at the May breakdown point (2,898).

Meanwhile, the Dow industrials’ recent price action is equally jagged.

Recall that major resistance matches the breakdown point — spanning from about 25,950 to 25,980 — an area also illustrated on the daily chart.

Consider that Friday’s session high (25,949) matched resistance, and the Dow has pulled in to its range.

Against this backdrop, the Nasdaq Composite’s












COMP, +1.09%










 immediate pullback — across the prior two sessions — has registered as the most aggressive.

Tactically, major support (7,670) matches the former range top, an area also illustrated on the daily chart below.

Monday’s session low (7,678) closely matched support, and Tuesday’s early upturn punctuates a second successful retest.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has thus far maintained major support. Recall that the former range top spanned from 7,643 to 7,670.

To reiterate, the week-to-date low (7,678) has registered just above the inflection point.

Separately, the Nasdaq has whipsawed at the breakdown point (7,850) an area roughly matching the 50-day moving average.

Looking elsewhere, the Dow Jones Industrial Average is traversing an increasingly familiar range.

Recall that the May low (25,222) has registered slightly above the range bottom (25,208).

Conversely, notable resistance matches the breakdown point, an area spanning from 25,950 to 25,980. (See the May 14 review.)

Thursday’s session high (25,957) and Friday’s high (25,949) have punctuated a failed initial retest. On further strength, the Dow’s 50-day moving average, currently 26,075, remains slightly more distant.

Meanwhile, the S&P 500 has maintained major support in the 2,800-to-2,817 area.

The subsequent rally attempt has been capped by cluttered technical territory, including the May breakdown point (2,898) better illustrated on the hourly chart.

The bigger picture

As detailed above, the U.S. benchmarks are off to a volatile start to the worst six months seasonally — May through October.

Amid the cross currents, the prevailing backdrop is not one-size-fits-all, though on balance, the bigger-picture technical damage has been relatively contained.

Each big three benchmark has maintained well-defined support, most notably the S&P 2,817 and Nasdaq 7,670 areas.

Moving to the small-caps, the iShares Russell 2000 ETF remains capped by its major moving averages.

The 200-day moving average (154.90) and 50-day moving average (155.48) closely match.

Conversely, the May low (151.16) marks a downside inflection point. An eventual violation would mark a “lower low” strengthening the bear case.

Meanwhile, the SPDR S&P MidCap 400 has pulled in to an extended test of the 200-day moving average, currently 344.90.

Here again, a tandem violation of the 200-day moving average and the May low (340.78) would strengthen the bear case.

Conversely, the 50-day moving average, currently 350.58, remains an overhead inflection point.

Looking elsewhere, the SPDR Trust S&P 500 has registered a comparably stronger mid-May rally attempt versus the small- and mid-cap benchmarks.

Tactically, notable overhead matches the mid-month range top, spanning from about 288.90 to 289.25, detailed previously.

Recall that last week’s high (289.21) matched resistance, punctuating a failed initial retest from underneath.

Placing a finer point on the S&P 500, its jagged May trade-fueled price action has defined a range, and the immediate field of play.

Tactically, the range top matches the May breakdown point (2,898) an area that has capped the S&P’s rally attempt.

Within the range, the 50-day moving average, currently 2,872, closely matches the 2,873 inflection point.

Conversely, and perhaps more importantly, the range bottom matches major support in the 2,800-to-2,817 area. This area matches the S&P’s breakout point from mini-crash territory, and defines its V-shaped reversal from the December low. As detailed repeatedly, the S&P 500’s intermediate-term bias remains bullish barring a violation.

Beyond technical levels, the U.S. sub-sector backdrop has softened on the margin, though it remains bullish-leaning on balance. For instance, the financials and transports have weathered the May downturn reasonably well.

Also see: Charting a rabbit-from-hat rally, S&P 500 narrowly holds last-ditch support.

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 United States Oil Fund












USO, -0.30%










 has thus far weathered a May downturn, pressured amid recent Iran- and trade-related tensions. The fund tracks the price of West Texas Intermediate (WTI) light, sweet crude oil.

Though the shares violated trendline support to start May, the downturn was subsequently underpinned by the 50- and 200-day moving averages. Put differently, downside follow-through was conspicuously absent.

As detailed repeatedly, the 50-day moving, currently 12.90, has defined the recent trend. The USO’s intermediate-term bias remains bullish barring a violation. (Also see the April 29 review and May 8 review.)

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












SMH, +2.17%










 has staged an aggressive May downturn, correcting as much as 16.7% from the April peak.

The downturn accelerated Monday as U.S. chipmakers cut off supplies to China’s Huawei amid the effective U.S. trade ban introduced late last week. (Restrictions have been temporarily eased early Tuesday, contributing to the broad-market rally.)

Technically, the group has narrowly maintained major support — at least so far. Two levels stand out:

• The 200-day moving average, currently 101.35.
• The former range top, matching the mid-October peak of 100.60.

The May low (100.58), established Monday, has matched major support, punctuating a successful retest. Tactically, the group’s risk-reward is favorable near current levels with a tight stop, circa 100.50. A violation of this area would inflict damage, raising the flag to a primary trend shift.

Meanwhile, the Consumer Staples Select Sector SPDR












XLP, -0.16%










 remains a pocket of resilience. (Yield = 2.7%.)

Technically, the group has established a steady uptrend from the December low, punctuated by a modest May break to 15-month highs.

Tactically, the prevailing range bottom closely matches the 50-day moving average, currently 56.25, and a posture higher supports a bullish bias. On further strength, the group’s record high (58.95), established Jan. 2018, is firmly within striking distance.

Initially profiled Dec. 10, Workday, Inc.












WDAY, +2.10%










 has returned 27.0% and remains well positioned.

As illustrated, the shares have knifed to all-time highs, clearing resistance matching the March peak. The strong-volume spike punctuates a bullish ascending triangle.

Tactically, the breakout point (200) is followed by trendline support closely tracking the 50-day moving average (195.50), Workday’s uptrend is firmly intact barring a violation.

American Express Co.












AXP, +0.35%










 is a well positioned Dow 30 component.

Late last month, the shares rallied to record territory, rising from a bullish cup-and-handle defined by the December and late-March lows.

The ensuing flag-like pattern positions the shares to build on the April breakout. A near-term target currently projects to the 125 area.

Tactically, trendline support is closely followed by the breakout point (114.50) and a posture higher supports a bullish bias.

Finally, Copa Holdings, S.A.












CPA, +1.34%










 is a mid-cap Panama-based regional airline coming to life.

Earlier this month, the shares gapped sharply higher, rising after the company’s quarterly results.

The subsequent pullback places the shares 7.5% under the May peak. Tactically, the top of the gap (86.60) closely matches the breakout point, 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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