Charting near-term technical damage, S&P 500 ventures under key support - MarketWatch

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 pulled in sharply from recent record highs, pressured amid the most aggressive selling pressure since October.

Against this backdrop, near-term damage has been inflicted to the S&P 500’s backdrop, though its more important intermediate-term bullish bias is intact.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +1.01%  hourly chart highlights the past two weeks.

As illustrated, the S&P has pulled in sharply from record highs.

Tactically, the breakout point (3,258) pivots to resistance, a level matching Monday’s session high (3,258.8).

This is followed by the 20-day moving average, currently 3,275, and resistance matching the former range bottom (3,280). A retest of this area from underneath is underway early Tuesday.

Meanwhile, the Dow Jones Industrial Average DJIA, +0.66%  has extended a pullback from record highs.

Consider that Monday’s close (28,535) registered just three points under the 2019 close (28,538), briefly placing the index in negative year-to-date territory.

From current levels, the 2019 peak (28,701) is followed by the Dow’s former breakout point (28,872), an area also detailed on the daily chart.

Against this backdrop, the Nasdaq Composite COMP, +1.43%  has also plunged from record highs, though this is the strongest major benchmark.

Consider that Monday’s session low (9,088) closely matched its breakout point (9,093), a level detailed repeatedly as the Nasdaq’s first notable floor. This area is also illustrated on the daily chart below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq formed a bearish key reversal to conclude last week. Recall that the session open registered as a record high, capping a single-day downdraft encompassing the prior session’s range. (In this case, the Nasdaq’s key reversal engulfed the range of the prior five sessions.)

The index subsequently gapped under its 20-day moving average, currently 9,204, notching just its second close lower since October. As always, the 20-day average is a widely-tracked near-term trending indicator.

Delving deeper, the Nasdaq has maintained its first notable floor at the breakout point (9,093), preserving a bullish intermediate-term bias.

Looking elsewhere, the Dow Jones Industrial Average has pulled in more aggressively from record highs.

In the process, the index has violated its breakout point (28,872), an area closely matching the 20-day moving average. A swift reversal atop this area would neutralize the late-month downdraft.

Delving deeper, the former range bottom (28,376) roughly matches the 50-day moving average, currently 28,396. An eventual violation of this area would raise an intermediate-term caution flag.

Meanwhile, the S&P 500 formed a bearish engulfing pattern to conclude last week. The session open and close encompassed, or engulfed, those of the prior session, raising the flag to a potential trend reversal.

The S&P subsequently gapped under its 20-day moving average, currently 3,275, and the breakout point (3,258) to start this week.

This marks the S&P’s second close under the 20-day moving average since October. (See the early-December whipsaw, and subsequent bullish reversal. A comparable swift recovery would neutralize the prevailing downdraft.)

The bigger picture

As detailed above, the major U.S. benchmarks have reversed sharply from recent record highs, pressured amid the most aggressive selling pressure since October.

In the process, notable damage has been inflicted for the first time since December, likely raising the flag to a long overdue consolidation phase — an extended chopping around period, if not a deeper pullback.

Moving to the small-caps, the iShares Russell 2000 ETF has placed distance under its breakout point (167.12).

Also consider that Monday’s close registered fractionally under the 50-day moving average — a widely-tracked intermediate-term trending indicator — for the first time since October.

The small-cap benchmark has reclaimed its 50-day early Tuesday, though the next several sessions will likely add color.

Similarly, the SPDR S&P MidCap 400 ETF has violated its breakout point (377.60), pressured amid increased volume.

Here again, Monday’s close registered fractionally under the 50-day moving average, currently 371.65, raising a technical question mark.

Tactically, the pending retest of resistance (377.60) from underneath should be a useful bull-bear gauge.

Looking elsewhere, the SPDR Trust S&P 500 has pulled in from record highs amid increased volume.

Tactically, familiar inflection points match the 20-day moving average, currently 326.66, and the breakout point — the 324.90-to-325.20 area.

The SPY’s trendline closely tracks the 20-day moving average. A swift reversal atop the trendline would neutralize the late-month downdraft.

Placing a finer point on the S&P 500, its aggressive downdraft raises a technical question mark.

To start, the S&P has registered a lone close under its breakout point (3,258) a level defining its first notable support. Monday’s session high (3,258.8) matched resistance.

From current levels, the former range bottom (3,280) roughly matches the 20-day moving average, illustrated below, currently 3,275. A sustained break atop these areas would neutralize the late-month downdraft.

Conversely, more important support rests at 3,215, a level matching the December gap (3,216), the January low (3,214.6) and the S&P’s former projected target (3,215).

The 50-day moving average, currently 3,202, is rising toward support.

So collectively, an eventual violation of the 3,200-to-3,215 area would mark a material “lower low” — combined with a violation of the 50-day moving average — raising an intermediate-term caution flag.

Beyond technical levels, consider that Monday’s internals pressed bearish extremes: NYSE declining volume surpassed advancing volume by a greater than 7-to-1 margin.

As always, in a textbook world, two 9-to-1 down days, across about a seven-session window, would reliably signal a bearish trend shift. So the clock is ticking on a potential second shoe to drop over about the next week. (As reference, the early-2019 market rally originated from two 9-to-1 up days across a precisely seven-session window.)

All told, the late-month downturn has inflicted damage, for the first time since December, and a near-term consolidation phase is underway. The S&P 500’s more important intermediate-term bias remains bullish, based on today’s backdrop, though the next several sessions will likely add color.

Also see: Bull trend persists, S&P 500 digests powerful rally atop 20-day volatility bands.

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, +1.35%  has extended its January technical breakdown. The fund tracks the price of West Texas Intermediate (WTI) light, sweet crude oil.

Prices have been pressured amid reduced travel expectations, due to the coronavirus, as well as concerns over China’s potential economic slowdown.

Technically, the shares have violated the 200-day moving average, plunging amid a sustained volume increase. The downturn builds on the early-January violation of trendline support, and subsequent failed retest from underneath.

Tactically, the 200-day moving average, currently 12.00, closely matches the breakdown point. An eventual close atop this area would place the brakes on bearish momentum. (Also see the Jan. 23 review.)

Meanwhile, the 10-year Treasury note yield TNX, +2.24%  has reached three-month lows, pressured partly amid a safe-haven trade. As always, Treasury prices and yields are inversely correlated. (As demand spikes for Treasuries, yields turn lower.)

Technically, the downturn confirms the bearish trend shift signaled to start 2020. Recall the early-month violation of trendline support, and subsequent failed test of the 50-day moving average, currently 1.82, from underneath.

As detailed repeatedly, the 50-day moving average effectively defined the 2019 trend, and it remains a useful bull-bear inflection point.

Slightly more broadly, the 200-day moving average, currently 1.93, is descending toward trendline resistance matching the former range top (1.90). The yield’s backdrop supports a bearish-leaning bias pending a close atop this area. (Also see the Jan. 17 review.)

Combined, lower energy prices and interest rates generally present a broad-market tailwind. Consider that the tandem trend shifts detailed above signaled to start 2020, before the coronavirus surfaced. (Put differently, the prevailing downturns are not exclusively the product of an exogenous event.)

Looking elsewhere, the SPDR Gold Shares ETF GLD, -0.89%  has tagged six-year highs amid a safe-haven trade.

The prevailing upturn has been fueled by increased volume, and punctuates a January flag-like pattern underpinned by the breakout point (145.10).

More broadly, the shares remain well positioned on the 10-year chart, rising from a bullish continuation pattern pinned to the steep mid-2019 rally. (Recall that the GLD’s relative strength index (not illustrated) has recently registered its two best levels on record — the June and January peaks — laying the groundwork for potentially material longer-term follow-through.)

Tactically, a sustained posture atop the breakout point supports a firmly-bullish bias. (Also see the Jan. 21 review.)

Finally, the iShares China Large-Cap ETF FXI, +0.69%  has turned firmly lower, pressured amid the coronavirus scare.

The downturn has been fueled by a sustained volume spike, and punctuates a violation of trendline support closely matching the former breakout point (43.00).

As a slight positive, the shares have maintained a floor matching the August gap (39.76), bottoming this week five cents higher. Tactically, a swift reversal atop the 200-day moving average, currently 41.68, would mark a step toward stabilization. The pending retest from underneath will likely add color.

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
Akamai Technologies, Inc.	AKAM	Jan. 24
StoneCo Ltd.	STNE	Jan. 24
Spirit Airlines, Inc.	SAVE	Jan. 23
Himax Technologies, Inc.	HIMX	Jan. 23
International Business Machines	IBM	Jan. 22
Yeti Holdings, Inc.	YETI	Jan. 22
Home Depot, Inc.	HD	Jan. 21
IntercontinentalExchange, Inc.	ICE	Jan. 16
PulteGroup, Inc.	PHM	Jan. 16
Square, Inc.	SQ	Jan. 16
Lattice Semiconductor Corp.	LSCC	Jan. 15
SailPoint Technologies Holdings, Inc.	SAIL	Jan. 15
Dunkin Brands Group, Inc.	DNKN	Jan. 15
SPDR S&P Homebuilders ETF	XHB	Jan. 14
Netflix, Inc.	NFLX	Jan. 14
Pfizer, Inc.	PFE	Jan. 14
Newmont Corp.	NEM	Jan. 13
SBA Communications Corp.	SBAC	Jan. 13
Guess, Inc.	GES	Jan. 13
CME Group, Inc.	CME	Jan. 10
Motorola Solutions, Inc.	MSI	Jan. 10
fMcDonald’s Corp.	MCD	Jan. 9
TE Connectivity Ltd.	TEL	Jan. 9
Big Lots, Inc.	BIG	Jan. 9
Micron Technology, Inc.	MU	Jan. 8
Zendesk, Inc.	ZEN	Jan. 8
Fortinet, Inc.	FTNT	Jan. 7
Atlassian Corp.	TEAM	Jan. 7
Twilio, Inc.	TWLO	Jan. 7
Coupa Software, Inc.	COUP	Jan. 6
Progressive Corp.	PGR	Jan. 6
SPDR Gold Shares ETF	GLD	Jan. 2
Amazon.com, Inc.	AMZN	Jan. 2
iShares Transportation Average ETF	IYT	Dec. 23
Union Pacific Corp.	UNP	Dec. 23
3M Co.	MMM	Dec. 20
Activision Blizzard, Inc.	ATVI	Dec. 20
Cree, Inc.	CREE	Dec. 19
Ciena Corp.	CIEN	Dec. 18
Air Products and Chemicals, Inc.	APD	Dec. 18
PTC Therapeutics, Inc.	PTCT	Dec. 18
Autodesk, Inc.	ADSK	Dec. 17
iRobot Corp.	IRBT	Dec. 17
American Express Co.	AXP	Dec. 16
Paycom Software, Inc.	PAYC	Dec. 16
FormFactor, Inc.	FORM	Dec. 16
NXP Semiconductors N.V.	NXPI	Dec. 11
Starbucks Corp.	SBUX	Dec. 10
Bristol-Myers Squibb Co.	BMY	Dec. 10
Splunk, Inc.	SPLK	Dec. 9
Macom Technology Solutions Holding, Inc.	MTSI	Dec. 6
Best Buy Co., Inc.	BBY	Dec. 6
Yamana Gold. Inc.	AUY	Dec. 5
VanEck Vectors Gold Miners ETF	GDX	Dec. 3
Pan American Silver Corp.	PAAS	Dec. 3
Nuance Communications, Inc.	NUAN	Dec. 3
Shopify,Inc.	SHOP	Nov. 27
Microchip Technology, Inc.	MCHP	Nov. 27
Lowe’s Companies, Inc.	LOW	Nov. 27
MKS Instruments, Inc.	MKSI	Nov. 26
UnitedHealth Group, Inc.	UNH	Nov. 25
Stanley Black & Decker, Inc.	SWK	Nov. 25
Baidu, Inc.	BIDU	Nov. 22
Medtronic plc	MDT	Nov. 21
Wheaton Precious Metals Corp.	WPM	Nov. 20
Nevro Corp.	NVRO	Nov. 19
Kroger Co.	KR	Nov. 19
Agios Pharmaceuticals, Inc.	AGIO	Nov. 18
Allstate Corp.	ALL	Nov. 14
Adobe, Inc.	ADBE	Nov. 14
Zebra Technologies Corp.	ZBRA	Nov. 13
AstraZenaca, plc	AZN	Nov. 12
Health Care Select Sector SPDR	XLV	Nov. 11
Advanced Micro Devices, Inc.	AMD	Nov. 7
AudioCodes, Ltd.	AUDC	Nov. 7
Alibaba Holdings Group, Ltd.	BABA	Nov. 5
Alphabet, Inc.	GOOGL	Nov. 4
Teledoc Health, Inc.	TDOC	Nov. 1
Salesforce.com, Inc.	CRM	Oct. 31
Qualcomm, Inc.	QCOM	Oct. 31
Citrix Systems, Inc.	CTXS	Oct. 31
Industrial Select Sector SPDR	XLI	Oct. 31
Invesco QQQ Trust	QQQ	Oct. 30
Centene Corp.	CNC	Oct. 30
Citigroup, Inc.	C	Oct. 28
Generac Holdings, Inc.	GNRC	Oct. 25
RingCentral, Inc.	RNG	Oct. 24
United Technologies Corp.	UTX	Oct. 23
Nvidia Corp.	NVDA	Oct. 22
Tesla, Inc.	TSLA	Oct. 21
Garmin, Ltd.	GRMN	Oct. 18
Facebook, Inc.	FB	Oct. 16
Qorvo, Inc.	QRVO	Oct. 16
Skyworks Solutions, Inc.	SWKS	Oct. 15
Jabil Inc.	JBL	Oct. 15
TJX Companies, Inc.	TJX	Oct. 8
Comtech Telecommunications Corp.	CMTL	Oct. 4
Taiwan Semiconductor Manufacturing Co.	TSM	Sept. 27
RH	RH	Sept. 27
Sony Corp.	SNE	Sept. 26
Nike, Inc.	NKE	Sept. 26
Toll Brothers, Inc.	TOL	Sept.25
Synaptics, Inc.	SYNA	Sept.25
Intel Corp.	INTC	Sept. 18
VanEck Vectors Semiconductor ETF	SMH	Sept. 11
Kansas City Southern	KSU	Sept. 10
CVS Corp.	CVS	Sept. 5
Lam Research Corp.	LRCX	Sept. 3
iShares U.S. Home Construction ETF	ITB	Aug. 27
Apple, Inc.	AAPL	Aug. 21
XPO Logistics, Inc.	XPO	Aug. 20
Itron, Inc.	ITRI	Aug. 19
Cirrus Logic	CRUS	Aug. 16
Builders FirstSource, Inc.	BLDR	Aug. 16
D.R. Horton, Inc.	DHI	July 31
Teradyne, Inc.	TER	July 30
Franco-Nevada Corp.	FNV	July 18
Inphi Corp.	IPHI	July 8
Lululemon Athletica, Inc.	LULU	June 19
Ross Stores, Inc.	ROST	June 14
Consumer Staples Select Sector SPDR	XLP	Mar. 28
iShares U.S. Real Estate ETF	IYR	Mar. 13
Costco Wholesale Corp.	COST	Mar. 6
Microsoft Corp.	MSFT	Feb. 22
Procter & Gamble Co.	PG	Feb. 8
Applied Materials, Inc.	AMAT	Jan. 25
Utilities Select Sector SPDR	XLU	Oct. 25

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