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Michael Ashbaugh

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May 7, 2019, 12:31 p.m. EDT

Bull trend under siege: S&P 500 ventures under near-term support

Focus: Homebuilders digest April breakout, XHB, ADBE, H, CY, OMC

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By Michael Ashbaugh, 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 U.S. benchmarks have whipsawed to start May, pressured amid heightened China-U.S. trade tensions and increased market volatility.

Though limited damage has thus far been inflicted — at least on a closing basis — notable support points are under siege Tuesday, placing several near-term technical trends in question.

Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +0.06%  hourly chart highlights the past two weeks.

As illustrated, the S&P is off to a volatile May start to begin the worst six months seasonally.

The index absorbed last week’s Fed-induced downdraft, and has subsequently whipsawed to start this week amid heightened trade tensions. Tactically, a notable floor matches the mid-April breakout point (2,896) an area that has underpinned recent volatility.

Meanwhile, the Dow industrials’ /zigman2/quotes/210598065/realtime DJIA +0.24%  backdrop remains characteristically softer.

The index briefly tagged one-month lows Monday before reversing respectably, rising to the former range.

Recall that notable support matches the top of the April gap (26,310) a level the Dow has effectively maintained on a closing basis. (Last week’s closing low (26,308) closely matched support.)

Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -0.08%  remains comparably stronger than the Dow.

Consider that last week’s close (8,164) marked a nominal record, eclipsing its former record by about two points.

More immediately, Monday’s session low (7,981) registered slightly above last week’s Fed-induced low (7,976). The successful retest, and reversal to the range, is technically constructive.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq continues to digest the mid-April break to record territory. Recall that the 20-day moving average, currently 8,045, has effectively underpinned the year-to-date uptrend.

Delving deeper, the Nasdaq’s first significant floor matches the breakout point (7,850). The 50-day moving average — a widely-tracked intermediate-term trending indicator, currently 7,822 — is rising toward support.

Looking elsewhere, the Dow Jones Industrial Average has thus far sustained the April breakout, though narrowly.

To reiterate, major support broadly spans from 26,240 to 26,310, levels matching the February peak and the top of the mid-April gap.

Delving deeper, three inflection points, detailed Monday, stand out:

  • The 50-day moving average, currently 26,087.

  • The top of the early-April gap at 26,071.

  • The April low of 26,062.

Against this backdrop, Tuesday’s early session low (26,012) has registered under support, though as always, it’s the close that matters. A closing violation of the areas detailed would raise a technical question mark.

Meanwhile, the S&P 500 has whipsawed near record highs amid a volatile May start.

Tactically, notable support matches the S&P’s former breakout point (2,896) and is followed by the firmer 2,873 mark.

The bigger picture

Collectively, the U.S. benchmarks absorbed last week’s Fed-induced whipsaw, and are back on the defensive this week amid heightened China-U.S. trade tensions.

Limited technical damage has thus far been inflicted, though notable support is under siege early Tuesday. (See the Dow’s 50-day moving average, currently 26,087, for instance.)

The session close, and the next several sessions, will likely add color.

Moving to the small-caps, the iShares Russell 2000 ETF /zigman2/quotes/209961116/composite IWM +0.0065%  has come to life amid recent volatility, tagging consecutive six-month closing highs.

The former range top (159.50) remains an inflection point, and the small-cap benchmark has ventured lower early Tuesday. An extended jagged breakout attempt remains in play.

/zigman2/quotes/210599714/realtime
US : S&P US
2,919.64
+1.89 +0.06%
Volume: 157.95M
June 19, 2019 9:54a
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
26,529.09
+63.55 +0.24%
Volume: 20.97M
June 19, 2019 9:54a
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/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
7,947.85
-6.03 -0.08%
Volume: 222,710
June 19, 2019 9:54a
loading...
/zigman2/quotes/209961116/composite
US : U.S.: NYSE Arca
$ 154.02
+0.0100 +0.0065%
Volume: 990,465
June 19, 2019 9:54a
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