Charting a bullish Q3 start, S&P 500 challenges major resistance

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.

The Technical Indicator starts its sixteenth year this month.

Against this backdrop, the U.S. benchmarks have weathered an unusually jagged 2018 first-half, though the market technicals have firmed with a strong third-quarter start. The charts below add color:

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +0.30%  hourly chart highlights the past two weeks.

As illustrated, the S&P has knifed atop the May peak (2,742) and rallied to next resistance.

The range top matches the S&P’s five-month closing peak (2,786.9), established last month, and is currently under siege. On further strength, slightly more distant overhead matches the March peak (2,802).

Similarly, the Dow Jones Industrial Average DJIA, +0.55%  has come to life.

In its case, the blue-chip benchmark has reclaimed the 200- and 50-day moving averages, reaching positive year-to-date territory slightly above the 2017 close (24,719).

Tactically, the former range top closely matches this week’s gap (24,520) and pivots to support.

Meanwhile, the Nasdaq Composite remains the strongest big three U.S. benchmark.

Recall that its recent price action resembles that of the S&P 500. Both benchmarks have knifed atop the breakdown point — Nasdaq 7,637 and S&P 2,742 — and subsequently extended the breakout.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has rallied sharply from the 50-day moving average, an area closely matching major support (7,474). Bullish price action.

The strong July start places the Nasdaq’s record close (7,781.5) and absolute record peak (7,806.6) firmly within view.

Looking elsewhere, the Dow Jones Industrial remains the weakest widely-tracked U.S. benchmark.

Still, the index has reclaimed its 200- and 50-day moving averages — across two sessions — rising to challenge familiar overhead.

Specifically, resistance broadly spans from 24,719 to 24,876, levels matching the 2017 close and 2017 peak. A close higher would place the Dow in recently less-charted territory, opening the path to potentially swift follow-through.

Meanwhile, the S&P 500 has reclaimed its breakdown point (2,742) knifing from a well-defined range.

The prevailing upturn originates from major support at the 2017 peak (2,695). The June low (2,692) closely matched support.

The bigger picture

Collectively, U.S. stocks are off to a constructive third-quarter start.

Each big three benchmark has rallied atop major resistance — including S&P 2,742 and Nasdaq 7,637 — a move initially fueled by last week’s strong monthly U.S. jobs report. The breakout has subsequently followed through despite persistent trade-related uncertainty.

Moving to the small-caps, the iShares Russell 2000 ETF remains the strongest widely-tracked U.S. benchmark.

The July rally punctuates a successful test of the 50-day moving average, and places all-time highs within view. The IWM’s record close (169.97) is closely followed by the absolute record peak (170.20).

Meanwhile, the S&P MidCap 400 has knifed to a stealth breakout attempt.

In fact, Monday’s close (365.39) marked a fractional record close, eclipsing the former record by just 25 cents.

The MDY’s absolute all-time high (366.10), established June 12, is currently under siege.

Looking elsewhere, the SPDR Trust S&P 500 has reclaimed its breakdown point (274.25) a level matching the May range top.

The rally places the June peak (279.48) within striking distance. The pending retest should be a useful bull-bear gauge.

Against this backdrop, the S&P 500 is acting well technically.

To start, the S&P has knifed atop its breakdown point (2,742) rising straight to its next significant hurdle. Resistance matches the June closing peak (2,687), and is currently under siege.

Moreover, the July rally originates from major support matching the 2017 peak (2,695). The June low registered just three points lower.

Put differently, the June downturn spanned 99 points — from top to bottom — and the S&P has rallied swiftly to its latest crack at the range top.

On further strength, the March peak (2,802) marks an inflection point, while the January gap broadly spans from 2,838 to 2,851.

More broadly, an intermediate-term target projects from the June low to about 2,890, a level surpassing the S&P’s all-time high (2,872).

Beyond specific levels, the S&P 500’s intermediate- to longer-term bias remains bullish despite the admittedly jagged 2018 backdrop. The retest of the range top, currently underway, should add color.

Tuesday’s Watch List

Initially profiled May 9, the SPDR S&P Oil and Gas Exploration & Production ETF XOP, -0.18%  has added 7.6% and remains well positioned.

As illustrated, the group has rallied from the 50-day moving average, a recent bull-bear inflection point. (See the April breakout.)

The prevailing upturn also punctuates a successful test of the breakout point, an area defined by the January and April peaks.

More broadly, the group is rising from a continuation pattern — underpinned by the 200-week moving average — illustrated on the three-year chart. The July rally opens the path to much less-charted territory, and potentially material upside follow-through.

Conversely, the Financial Select Sector SPDR XLF, -0.35%  remains a 2018 laggard.

Still, the group has come to life this week, rising from seven-month lows to reclaim the breakdown point (26.50) on increased volume.

More distant overhead matches the 50- and 200-day moving averages, an area closely followed by trendline resistance. An eventual close higher would likely signal a trend shift, strengthening the broad-market bull case. The pending retest is worth tracking.

Charting well positioned Dow 30 components

Initially profiled April 30, Dow 30 component Nike, Inc. NKE, +0.38%  has returned 11.1% and remains well positioned.

Late last month, the shares gapped to all-time highs, rising after the company’s strong fourth-quarter results.

The ensuing pullback has been comparably flat, placing the shares at an attractive entry near the breakout point and 4.8% under the June peak.

Looking elsewhere, 3M Co. MMM, +0.40%  is a beaten down Dow 30 component showing signs of life. (Yield = 2.7%.)

As illustrated, the shares have edged atop a nearly six-month downtrend that closely tracks the 50-day moving average, currently 199.90.

The upturn comes from a tight two-week range — underpinned by major support — laying the groundwork for potentially more decisive follow-through. Tactically, the former range top, circa 199, closely matches the trendline, and a breakout attempt is in play barring a violation.

Meanwhile, Coca-Cola Co. KO, +1.23%  is a third Dow 30 component positioned to rise. (Yield = 3.5%.)

Late last week, the shares cleared trendline resistance, rising to challenge the 200-day moving average, currently 44.70. This area closely matches a four-month range top (45.10) and an eventual close higher opens the path to less-charted territory.

Tactically, the trendline pivots to support, circa 44.00, and the recovery attempt is intact barring a violation.

Finally, VMWare, Inc. VMW, +0.61%  — not a Dow 30 component — is a well positioned large-cap data storage name.

As illustrated, the shares have recently knifed to a record close, rising after parent Dell Technologies announced it will return to the public markets via acquisition of its tracking stock, reducing the chances of a reverse merger with VMWare.

The ensuing pullback places the shares at an attractive entry near the top of the gap (153.60) and 6.1% under the July peak. A slightly deeper floor matches the trendline and the bottom of the gap (149.00).

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
NetEase, Inc.	NTES	July 9
Hess Corp.	HES	July 9
Dish Network Corp.	DISH	July 9
Seattle Genetics, Inc.	SGEN	July 9
Johnson & Johnson	JNJ	July 5
Kroger Co.	KR	July 5
Iron Mountain, Inc.	IRM	July 5
Agnico Eagle Mines Limited	AEM	July 5
Silicon Motion Technology Corp.	SIMO	July 3
CyrusOne, Inc.	CONE	July 3
At Home Group, Inc.	HOME	July 3
FleetCor Technologies, Inc.	FLT	July 2
Tandem Diabetes Care, Inc.	TNDM	July 2
Diamond Offshore Drilling, Inc.	DO	July 2
Oceaneering International, Inc.	OII	June 29
PTC, Inc.	PTC	June 29
Puma Biotechnology, Inc.	PBYI	June 29
NII Holdings, Inc.	NIHD	June 29
Cirrus Logic, Inc.	CRUS	June 27
BioMarin Pharmaceutical, Inc.	BMRN	June 27
Canada Goose Holdings, Inc.	GOOS	June 27
Church & Dwight Co., Inc.	CH	June 27
iRobot Corp.	IRBT	June 25
CF Industries Holdings, Inc.	C	June 25
Marathon Oil Corp.	MRO	June 25
Procter & Gamble Co.	P	June 22
Semtech Corp.	SMTC	June 22
Lands’ End, Inc.	L	June 21
Endeavor Silver Corp.	EXK	June 21
Merck & Co., Inc.	MRK	June 21
Williams-Sonoma, Inc.	WSM	June 20
Spark Therapeutics, Inc.	ONCE	June 20
Vishay Intertechnology, Inc.	VSH	June 18
Dillard’s, Inc.	DDS	June 18
Alphabet, Inc.	GOOGL	June 15
Allergan	AGN	June 15
Pepsico, Inc.	PEP	June 14
Glu Mobile, Inc.	GLUU	June 14
Mosaic Co.	MOS	June 13
Consumer Staples Select Sector SPDR	XLP	June 13
Roku, Inc.	ROKU	June 12
Analog Devices, Inc.	ADI	June 12
Viking Therapeutics, Inc.	VKTX	June 12
Medicines Co.	MDCO	June 11
Health Care Select Sector SPDR	XLV	June 8
Monster Beverage Corp.	MNST	June 7
VMWare, Inc.	VMW	June 6
SPDR S&P Biotech ETF	XBI	June 5
Twitter, Inc.	TWTR	June 5
Kohl’s Corp.	KSS	June 5
Pan American Silver Corp.	PAAS	May 25
Immunomedics, Inc.	IMMU	May 24
Supernus Pharmaceuticals, Inc.	SUPN	May 23
Electronic Arts, Inc.	E	May 22
Momo, Inc.	MOMO	May 22
Union Pacific Corp.	UNP	May 21
Twilio, Inc.	TWLO	May 21
Intercept Pharmaceuticals, Inc.	ICPT	May 21
Energy Select Sector SDPR	XLE	May 18
Range Resources Corp.	RRC	May 17
SPDR S&P Metals & Mining ETF	XME	May 17
SPDR S&P Retail ETF	XRT	May 15
Lowe’s Companies, Inc.	LOW	May 14
Texas Instruments, Inc.	TXN	May 11
PowerShares QQQ Trust	QQQ	May 10
Facebook, Inc.	FB	May 9
Electronics for Imaging, Inc.	EFII	May 9
SPDR S&P Oil and Gas Exploration & Production ETF	XOP	May 9
Coupa Software, Inc.	COUP	May 8
Apple, Inc.	AAPL	May 7
PDC Energy, Inc.	PDCE	May 7
Under Armour, Inc.	U	May 2
Norfolk Southern Corp.	NSC	May 2
Advanced Micro Devices, Inc.	AM	May 1
UnitedHealth Group, Inc.	UNH	Apr. 30
Nike, Inc.	NKE	Apr. 30
DSW, Inc.	DSW	Apr. 30
Home Depot, Inc.	H	Apr. 27
Noble Energy, Inc.	NBL	Apr. 27
Costco Wholesale Corp.	COST	Apr. 26
CSX Corp.	CSX	Apr. 26
Applied Optoelectronics, Inc.	AAOI	Apr. 19
Chipotle Mexican Grill, Inc.	CMG	Apr. 19
Wingstop, Inc.	WING	Apr. 19
F5 Networks, Inc.	FFIV	Apr. 18
EOG Resources, Inc.	EOG	Apr. 11
Autodesk, Inc.	ADSK	Apr. 10
NetApp, Inc.	NTAP	Apr. 9
Whiting Petroleum Corp.	WLL	Mar. 22
Domino’s Pizza, Inc.	DPZ	Mar. 21
Veeva Systems, Inc.	VEEV	Mar. 15
Burlington Stores, Inc.	BURL	Mar. 14
Baozun, Inc.	BZUN	Mar. 9
AxoGen, Inc.	AXGN	Mar. 8
TJX Companies, Inc.	TJX	Mar. 6
Chart Industries, Inc.	GTLS	Mar. 6
Macy’s, Inc.		Mar. 5
Five9, Inc.	FIVN	Mar. 5
LivePerson, Inc.	LPSN	Feb. 28
VeriSign, Inc.	VRSN	Feb. 26
Shutterfly, Inc.	SFLY	Feb. 22
ServiceNow, Inc.	NOW	Feb. 21
Palo Alto Networks, Inc.	PANW	Feb. 16
Adobe Systems, Inc.	ADBE	Feb. 16
Salesforce.com, Inc.	CRM	Feb. 12
Fortinet, Inc.	FTNT	Jan 19
Arrowhead Pharmaceuticals Corp.	ARWR	Jan. 11
Sarepta Therapeutics, Inc.	SRPT	Jan. 3
MSCI, Inc.	MSCI	Nov. 20
Motorola Solutions, Inc.	MSI	Nov. 14
Lululemon Athletica, Inc.	LULU	Oct. 24
HubSpot, Inc.	HUBS	Oct. 4
XPO Logistics, Inc.	XPO	Oct. 2
Nvidia Corp.	NVDA	Sept. 27
Bottomline Technologies, Inc.	EPAY	July 13
GrubHub, Inc.	GRUB	May 4
Square, Inc.	S	Mar. 3
Netflix, Inc.	NFLX	Oct. 4
Microsoft Corp.	MSFT	Aug. 5