Editor’s Note: This is a free edition of The Technical Indicator, a daily MarketWatch subscriber newsletter. To get this column each market day, click here.
Technically speaking, the major U.S. benchmarks have reached the worst six months seasonally — May through October — against an already bearish-leaning backdrop.
On headline basis, the S&P 500 remains capped by major resistance, while elsewhere, an ominous chart pattern continues to take shape on the Nasdaq Composite.
Before detailing the U.S. markets’ wider view, the S&P 500’s hourly chart highlights the past two weeks.
As illustrated, the S&P remains capped by well-defined overhead.
Familiar resistance matches the 2017 close (2,673) and is followed by the 50-day moving average, currently 2,685.
More broadly, resistance closely matches the S&P’s downtrend from the March peak.
Similarly, the Dow Jones Industrial Average is traversing a jagged near-term range.
Here again, the Dow has struggled to reclaim its breakdown point (24,328) and remains capped by the more distant 50-day moving average.
Meanwhile, the Nasdaq Composite continues to whipsaw amid technical price action.
The index notched consecutive closes last week matching the 7,120 resistance — Thursday at 7,119 and Friday at 7,120 — before extending the pullback slightly to conclude April.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has recently whipsawed between the 7,000 mark and the 50-day moving average.
Recall that the late-April closing low (7,003.7) matched the 2017 peak (7,004).
More broadly, the Nasdaq’s intermediate-term bias remains bearish.
A developing head-and-shoulders top — defined by the January, March and April peaks — remains in progress. The bearish pattern is capped by the March island reversal.
Looking elsewhere, the Dow Jones Industrial Average is traversing a relatively wide range.
Tactically, near-term support matches the late-April low (23,823), and is followed by the 200-day moving average, currently 23,727.
As always, the 200-day is a widely-tracked primary trending indicator, and an eventual violation would raise a technical red flag.
Meanwhile, the S&P 500’s intermediate-term bias remains bearish-leaning.
Familiar resistance broadly spans from 2,673 to 2,695, the latter matching the 2017 peak.
This area also currently matches trendline resistance and the 50-day moving average. An eventual close higher would strengthen the bull case.
The bigger picture
As detailed above, the major U.S. benchmarks have reached the worst six months seasonally — May through October — against an already bearish backdrop.
The April rally attempt registered as lackluster, on balance, and was punctuated by each benchmark’s “lower high.”
Separately, each benchmark has asserted a posture under its downward sloping 50-day moving average, consistent with a bearish intermediate-term bias.
Moving to the small-caps, the iShares Russell 2000 ETF has flatlined just under the 2017 peak (155.41).
Separately, the small-cap benchmark concluded April slightly under the 50-day moving average (154.05) a recent bull-bear inflection point.
Tactically, deeper support (150.50) is closely followed by the 200-day moving average, currently 149.30.
Meanwhile, the S&P MidCap 400’s backdrop remains comparably weaker.
As illustrated, the MDY has established a series of “lower highs” defining trendline resistance.
Conversely, the 200-day moving average, currently 335.70, has thus offered support, though a third retest is within striking distance. As always, major support is frequently violated on the third or fourth independent test.
Against this backdrop, the SPDR Trust S&P 500’s price action remains technical even amid recent volatility.
Recall that near-term resistance matches the former range top (266.64). The SPY has registered consecutive weekly closes within eight cents.
Conversely, major support spans from 260.85 to 261.00, levels matching the late-April low and the 200-day moving average.
Summing up the backdrop
All told, the U.S. benchmarks’ bigger-picture backdrop continues to support a bearish-leaning bias.
As it applies to the S&P 500, familiar overhead broadly spans from 2,673 to 2,695, levels matching the 2017 close and the 2017 peak.
On further strength, additional overhead rests at 2,710, a level matching the April closing peak (2,708.6) and the top of the March gap (2,709.8).
Tactically, a close atop the 2017 peak (2,695) would mark technical progress. Still, the 2,710 area matches gap resistance, and an eventual breakout would mark a “higher high” more firmly strengthening the bull case.
Conversely, former S&P 500 support (2,605) roughly matches the 200-day moving average, currently 2,613.
The S&P has registered just one close under the 200-day moving average since June 2016. (The April 2 close.)
An eventual violation of the 200-day would raise a red flag, likely opening the path to a former technical target (2,530) matching the 2018 low (2,532.7).
Beyond specific levels, the first-quarter earnings reports have not yet delivered as a catalyst to repair recent technical damage.
Despite generally strong reports, the subsequent rally attempts have registered as lackluster, frequently punctuated by closes near session lows. Bearish price action.
More broadly, the U.S. sub-sector backdrop remains bearish-leaning, and May 1 marks the start of the worst six months seasonally.
Tuesday’s Watch List
Drilling down further, the U.S. dollar has taken flight, extending a potentially consequential breakout.
Consider that the CurrencyShares U.S. Dollar Bullish ETF has placed distance atop trendline resistance, and the 200-day moving average, currently 23.98.
The nearly straigthline spike raises the flag to a primary trend shift.
Tactically, notable support spans from 23.96 to 23.98, levels matching the 2016 low and 200-day moving average. A posture higher supports a bullish longer-term bias.
More broadly, recall that rising Treasury yields have contributed to the dollar’s resurgence. Generally speaking, rising interest rates and a strengthening dollar constitute a U.S. stock market headwind. (Also see the April 24 review.)
Separately, the widely-tracked ICE U.S. Dollar Index has cleared its 200-day moving average, currently 92.01, early Tuesday.
Moving to U.S. sectors, the Financial Select Sector SPDR is not acting well technically.
As illustrated, the group has barely budged in recent weeks even amid the pronounced 2018 interest-rate spike.
As always, the group “should” benefit from an improved rate spread, amid a rising-rate backdrop, the difference between the rate at which a bank borrows and subsequently lends to its customers.
More plainly, the XLF’s persistent sluggishness is a head-scratcher.
Tactically, resistance matches the breakdown point (27.89) and is followed by the range top (28.24). An eventual close higher would strengthen the bull case.
Conversely, the 200-day moving average, currently 27.03, has thus far underpinned the 2018 downturn. An eventual violation would signal a primary trend shift, opening the path to potentially material downside follow-through.
Moving to specific names, Advanced Micro Devices, Inc. is a large-cap semiconductor name coming to life.
Late last month, the shares gapped sharply higher, rising after the company’s strong first-quarter results. The rally places the shares atop trendline resistance, as well as the breakdown point (11.00), an area closely matching the 50-day moving average.
Slightly deeper support matches the top of the gap (10.60) and the recovery attempt is intact barring a violation.
58.com, Inc. is a well positioned large-cap Beijing-based Internet name.
As illustrated, the shares are challenging resistance, amid a volume spike, rising from an ascending triangle pinned to the February low.
The range top matches record highs — illustrated on the four-year chart — meaning that a breakout opens the path to uncharted territory. An intermediate-term target projects to the 96 area on follow-through.
Yum China Holdings, Inc. is a large-cap name operating restaurants including KFC, Taco Bell and Pizza Hut.
Technically, the shares have launched from major support, clearing trendline resistance as well as the 200- and 50-day moving averages. The strong-volume spike signals a trend shift.
Underlying the upturn, its relative strength index (not illustrated) has registered two-month highs, improving the chances of incremental follow-through.
Though near-term extended, and due to consolidate, the rally attempt is intact barring a violation of the breakout point (41.70).
Editor’s Note: This is a free edition of The Technical Indicator, a daily MarketWatch subscriber newsletter. To get this column each market day, click here.
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 |
| UnitedHealth Group, Inc. | Apr. 30 | |
| Nike, Inc. | Apr. 30 | |
| DSW, Inc. | Apr. 30 | |
| Alaska Air Group, Inc. | Apr. 30 | |
| Home Depot, Inc. | Apr. 27 | |
| Best Buy Co., Inc. | Apr. 27 | |
| Noble Energy, Inc. | Apr. 27 | |
| Sanmina Corp. | Apr. 27 | |
| Golar LNG Limited | Apr. 26 | |
| Costco Wholesale Corp. | Apr. 26 | |
| CSX Corp. | Apr. 26 | |
| Globus Medical, Inc. | Apr. 23 | |
| Applied Optoelectronics, Inc. | Apr. 19 | |
| Chipotle Mexican Grill, Inc. | Apr. 19 | |
| Wingstop, Inc. | Apr. 19 | |
| F5 Networks, Inc. | Apr. 18 | |
| Workday, Inc. | Apr. 18 | |
| FedEx Corp. | Apr. 17 | |
| Pacira Pharmaceuticals, Inc. | Apr. 17 | |
| Barrick Gold Corp. | Apr. 16 | |
| Valero Energy | Apr. 16 | |
| EOG Resources, Inc. | Apr. 11 | |
| Sarepta Therapeutics, Inc. | Apr. 11 | |
| Autodesk, Inc. | Apr. 10 | |
| Intrexon Corp. | Apr. 10 | |
| NetApp, Inc. | Apr. 9 | |
| GlaxoSmithKline | Apr. 9 | |
| AMC Entertainment Holdings, Inc. | Apr. 9 | |
| American Eagle Outfitters, Inc. | Apr. 5 | |
| Guess, Inc. | Apr. 2 | |
| Continental Resources, Inc. | Apr. 2 | |
| Whiting Petroleum Corp. | Mar. 22 | |
| Domino’s Pizza, Inc. | Mar. 21 | |
| Orbotech Ltd. | Mar. 16 | |
| Eastman Chemical Co. | Mar. 16 | |
| Veeva Systems, Inc. | Mar. 15 | |
| Autohome, Inc. | Mar. 14 | |
| Burlington Stores, Inc. | Mar. 14 | |
| Baozun, Inc. | Mar. 9 | |
| Marathon Petroleum Corp. | Mar. 9 | |
| Intel Corp. | Mar. 8 | |
| AxoGen, Inc. | Mar. 8 | |
| Zebra Technologies Corp. | Mar. 7 | |
| TJX Companies, Inc. | Mar. 6 | |
| Chart Industries, Inc. | Mar. 6 | |
| Macy’s, Inc. | Mar. 5 | |
| Five9, Inc. | Mar. 5 | |
| LivePerson, Inc. | Feb. 28 | |
| VeriSign, Inc. | Feb. 26 | |
| Shutterfly, Inc. | Feb. 22 | |
| ServiceNow, Inc. | Feb. 21 | |
| Palo Alto Networks, Inc. | Feb. 16 | |
| Adobe Systems, Inc. | Feb. 16 | |
| Salesforce.com, Inc. | Feb. 12 | |
| Red Hat, Inc. | Feb. 1 | |
| iShares Latin American 40 ETF | Jan. 30 | |
| Fortinet, Inc. | Jan 19 | |
| Insulet Corp. | Jan. 17 | |
| Arrowhead Pharmaceuticals Corp. | Jan. 11 | |
| Vericel Corp. | Jan. 10 | |
| Sarepta Therapeutics, Inc. | Jan. 3 | |
| SPDR Gold Trust | Jan. 2 | |
| Seagate Technology | Dec. 13 | |
| Best Buy Co. | Dec. 11 | |
| Abercrombie & Fitch Co. | Nov. 20 | |
| MSCI, Inc. | Nov. 20 | |
| Motorola Solutions, Inc. | Nov. 14 | |
| Splunk, Inc. | Nov. 9 | |
| Akamai Technologies, Inc. | Oct. 30 | |
| Lululemon Athletica, Inc. | Oct. 24 | |
| HubSpot, Inc. | Oct. 4 | |
| XPO Logistics, Inc. | Oct. 2 | |
| Nvidia Corp. | Sept. 27 | |
| Southern Copper Corp. | Aug. 17 | |
| Bottomline Technologies, Inc. | July 13 | |
| GrubHub, Inc. | May 4 | |
| Square, Inc. | Mar. 3 | |
| Paycom Software, Inc. | Feb. 24 | |
| Netflix, Inc. | Oct. 4 | |
| Microsoft Corp. | Aug. 5 |