By Michael Ashbaugh, MarketWatch
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Technically speaking, the major U.S. benchmarks have sustained a break to record territory amid still conspicuously muted November selling pressure.
Against this backdrop, the big three benchmarks remain near-term extended — and are due a cooling-off period, if not a corrective pullback — though the more important longer-term market bias remains comfortably bullish.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +0.91% hourly chart highlights the past two weeks.
As illustrated, the S&P has extended the November break to record territory.
The prevailing upturn punctuates a flag-like pattern defined by last week’s tight range. Tactically, the 3,100 area marks an inflection point, and is followed by a slightly deeper floor, circa 3,085.
Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.22% has rallied atop the 28,000 mark.
The breakout punctuates an orderly six-session range.
Tactically, near-term inflection points match last week’s gap, at 27,843 and 27,800. This is closely followed by the former range top (27,774) an area that broadly pivots to near-term support.
Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +1.00% has also extended to record territory.
From current levels, the top of the gap (8,504) is closely followed by the former range top (8,483). This area broadly caps a mid-month flag-like pattern better illustrated below.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has staged a decisive November breakout. The nearly straightline spike punctuates a double bottom defined by the August and October lows.
To reiterate, a near-term floor matches the 8,500 area. Delving deeper, gap support (8,386) is followed by the much firmer breakout point (8,339).
More broadly, the Nasdaq remains near-term extended, and is due to consolidate at some point, though its intermediate-term bias remains firmly bullish barring a violation of the breakout point.
Looking elsewhere, the Dow Jones Industrial Average has tagged the 28,000 mark for the first time on record.
The prevailing upturn originates from the breakout point — the 27,400 mark — an area matching the July peak (27,398) and the November gap (27,402).
The post-breakout low (27,408), established Nov. 6, closely matched major support, and has been punctuated by sharp follow-through to new highs. Bullish price action.
Meanwhile, the S&P 500 has also taken flight, rising atop the 3,100 mark.
Against this backdrop, the S&P’s all-time high (3,127.6) — established early Tuesday — has registered firmly within view of its intermediate-term target (3,140) detailed repeatedly.
The bigger picture
As detailed above, the major U.S. benchmarks have broken decisively to record territory and are still refusing to materially pull in.
Moreover, the persistent November spike has been punctuated by constructive market rotation, detailed previously.
Though each big three benchmark remains near-term extended — and is due to consolidate at some point — the more important intermediate-term market bias remains firmly bullish.
Moving to the small-caps, the iShares Russell 2000 ETF /zigman2/quotes/209961116/composite IWM +1.17% continues to lag behind.
Still, the prevailing flag pattern is constructive amid pronounced strength elsewhere. The small-cap benchmark has thus far maintained major support (158.00) on a closing basis, positioning it to build on the steep October rally.
Meanwhile, the SPDR S&P MidCap 400 has also asserted a flag pattern, in its case digesting a break to 52-week highs.
Recall that notable support spans from 360.50 to 361.43, levels matching the post-breakout low and the November gap. A sustained posture atop this area signals a firmly bullish bias.