By Michael Ashbaugh, MarketWatch
The downturn punctuates the S&P’s first closing violation of the 50-day moving average since April.
Tactically, the breakdown point (3,310) pivots to key resistance. A swift reversal back atop this area would place the S&P on firmer technical ground, neutralizing the prevailing downdraft.
The pending retest from underneath should be a useful bull-bear gauge.
Collectively, the S&P 500 has violated its 50-day moving average and major support (3,328) amid aggressive 7-to-1 negative breadth.
The downturn signals a bearish intermediate-term bias pending repairs.
(On a granular, and slightly positive note, the S&P also formed a bullish single-day reversal Monday almost precisely defined by its next notable support. Recall the session low matched the June peak (3,233) and the session close matched the July peak (3,280). The “bullish reversal” nonetheless marked a 1.1% daily downturn.)
Tactically, the S&P 500’s breakdown point — the 3,310-to-3,328 area — pivots to key resistance. A swift reversal atop this area would place the index on firmer technical ground, neutralizing the prevailing downturn. The S&P’s backdrop supports a bearish intermediate-term bias pending such a move.
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.
U.S. sector damage broadens, though pockets of strength persist
Drilling down further, the September market downturn continues to inflict damage, though familiar pockets of strength persist. Several groups exemplify the prevailing backdrop:
To start, the Financial Select Sector SPDR’s /zigman2/quotes/209660484/composite XLF +1.10% backdrop has finally cracked.
Specifically, the group has violated major support, an area matching its former range top (24.50) and the 50-day moving average (24.60).
The downturn originates from trendline resistance, and signals an intermediate-term trend shift.
Tactically, a swift reversal atop the breakdown point (24.50) would place the group on firmer technical ground. The pending retest from underneath should add color.
Similarly, the SPDR S&P Regional Banking ETF has signaled a trend shift.
As illustrated, the group has reached two-month lows, violating trendline support on increased volume. The downturn punctuates a head-and-shoulders top defined by the April, June and August peaks.
Here again, the breakdown point (36.90) pivots to key resistance. The group’s backdrop supports a bearish intermediate-term bias pending a close atop this area.
Meanwhile, the Energy Select Sector SPDR has extended to four-month lows.
The prevailing downturn punctuates a flat mid-month rally attempt, and failed test of the breakdown point (34.25) from underneath. Bearish price action.
Looking elsewhere, the Invesco QQQ Trust /zigman2/quotes/208575548/composite QQQ +0.13% tracks the Nasdaq 100 Index, and serves as a large-cap technology sector proxy.
This group paced the early-September market downdraft, and remains tenuously positioned.
Technically, the mid-month bounce has been capped by trendline resistance, and punctuated by a strong-volume violation of the 50-day moving average. Shaky price action.
Monday’s close (267.51) registered within the support band. A potentially consequential retest remains underway.
To reiterate, a close under the 264.60 area would mark a “lower low” — combined with a violation of the 50-day moving average — raising an intermediate-term caution flag.
Familiar pockets of strength persist
Conversely, familiar pockets of sector strength stand out:
To start, the iShares Transportation Average /zigman2/quotes/204736489/composite IYT +0.40% has pulled in from two-year highs amid a downturn that has inflicted limited damage in the broad sweep.
Recall that trendline support tracks the 50-day moving average, and is rising toward the former breakout point (190.00). A posture higher signals a bullish intermediate-term bias.
More broadly, recall that the early-August spike marked a two standard deviation breakout, encompassing four straight closes atop the 20-day volatility bands. The comparably flat prevailing pullback — at least so far — supports a comfortably bullish longer-term outlook.
Meanwhile, the Industrial Select Sector SPDR /zigman2/quotes/202026558/composite XLI +0.14% has reversed from six-month highs. (Yield = 1.9%.)
In the process, the group’s violation of trendline support has been fueled by a volume spike, the strongest print since June.
Still, the group has maintained support matching its breakout point (76.15) and the ascending 50-day moving average, currently 75.60. Limited damage has been inflicted.
Delving slightly deeper, the 200-day moving average, currently 72.35, marked a former inflection point. Tactically, the group’s rally attempt gets the benefit of the doubt barring a violation of the 200-day.
More broadly, the tandem industrials and transports strength supports the bull case. (Under Dow Theory, a bull market is confirmed when the pair registers new highs concurrently, or closely in time.)
Finally, the Materials Select Sector SPDR /zigman2/quotes/204467551/composite XLB -1.28% also remains relatively resilient. (Yield = 2.1%.)
Though the group has reversed respectably from last week’s record high, the downturn has been fueled by lukewarm volume.
And here again, the group has initially maintained support matching its breakout point (63.10) and the ascending 50-day moving average, currently 62.80.
Delving deeper, likely last-ditch support (61.30) closely matches the February peak. The group’s bullish intermediate-term bias gets the benefit of the doubt pending a violation.
Summing up the sector backdrop
All told, this week’s downturn has incrementally damaged the U.S. sector backdrop.
On a headline basis, the financials have joined large-cap technology as a key bear-case contributor.
Still, familiar pockets of strength persist amid the September market cross currents. Collectively, the prevailing sub-sector backdrop supports a guardedly bullish-leaning bias, though potentially consequential technical tests remain underway.
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* (Click symbol for chart.)||Date Profiled|
|Maxar Technologies, Inc.||MAXR||Sept. 18|
|V.F. Corp.||VFC||Sept. 14|
|Crocs, Inc.||CROX||Sept. 14|
|Toyota Motor Co.||TM||Sept. 14|
|Five Below, Inc.||FIVE||Sept. 10|
|Dow Inc.||DOW||Sept. 10|
|Eastman Chemical Co.||EMN||Sept. 10|
|CrowdStrike Holdings, Inc.||CRWD||Sept. 9|
|Workhorse Group, Inc.||WKHS||Sept. 9|
|International Paper Co.||IP||Sept. 3|
|Anaplan, Inc.||PLAN||Sept. 2|
|Beyond Meat, Inc.||BYND||Sept. 1|
|Elastic N.V.||ESTC||Sept. 1|
|Celanese Corp.||CE||Aug. 26|
|Norfolk Southern Corp.||NSC||Aug. 25|
|Westlake Chemical Corp.||WLK||Aug. 25|
|Deere & Co.||DE||Aug. 24|
|PulteGroup, Inc.||PHM||Aug. 24|
|Expedia Group, Inc.||EXPE||Aug. 24|
|Visa, Inc.||V||Aug. 21|
|Johnson Controls International||JCI||Aug. 21|
|Adobe, Inc.||ADBE||Aug. 20|
|Canadian Solar, Inc.||CSIQ||Aug. 20|
|General Motors Co.||GM||Aug. 20|
|Starbucks Corp.||SBUX||Aug. 18|
|Builders FirstSource, Inc.||BLDR||Aug. 18|
|Steel Dynamics, Inc.||STLD||Aug. 17|
|Elanco Animal Health, Inc.||ELAN||Aug. 17|
|Brinker International, Inc.||EAT||Aug. 13|
|Enphase Energy, Inc.||ENPH||Aug. 13|
|Nike, Inc.||NKE||Aug. 11|
|Nucor Corp.||NUE||Aug. 11|
|Financial Select Sector SPDR||XLF||Aug. 10|
|Freeport McMoRan, Inc.||FCX||Aug. 10|
|Natera, Inc.||NTRA||Aug. 10|
|Lennar Corp.||LEN||Aug. 7|
|McDonald’s Corp.||MCD||Aug. 7|
|Mastercard, Inc.||MA||Aug. 6|
|United Health Group, Inc.||UNH||Aug. 6|
|Kansas City Southern||KSU||Aug. 6|
|Industrial Select Sector SPDR||XLI||Aug. 6|
|Verizon Communications, Inc.||VZ||Aug. 5|
|Sunrun, Inc.||RUN||Aug. 5|
|Coeur Mining, Inc.||CDE||Aug. 5|
|Southern Copper Corp.||SCCO||Aug. 3|
|Penn National Gaming, Inc.||PENN||July 30|
|Procter & Gamble Co.||PG||July 29|
|SPDR S&P Metals & Mining ETF||XME||July 28|
|iShares MSCI South Korea ETF||EWY||July 28|
|Toll Brothers, Inc.||TOL||July 27|
|HP, Inc.||HPQ||July 24|
|Advanced Micro Devices, Inc.||AMD||July 23|
|Best Buy Co., Inc.||BBY||July 22|
|iShares Europe ETF||IEV||July 21|
|Materials Select Sector SPDR||XLB||July 20|
|Caterpillar, Inc.||CAT||July 20|
|iShares U.S. Home Construction ETF||ITB||July 17|
|Progressive Corp.||PGR||July 17|
|Livongo Health, Inc.||LVGO||July 17|
|Roku, Inc.||ROKU||July 16|
|Catalent, Inc.||CTLT||July 16|
|Cognizant Technology Solutions, Inc.||CTSH||July 16|
|Health Care Select Sector SPDR||XLV||July 16|
|Consumer Staples Select Sector SPDR||XLP||July 15|
|Home Depot, Inc.||HD||July 15|
|Costco Wholesale Corp.||COST||July 15|
|Kirkland Lake Gold, Ltd.||KL||July 15|
|Air Products & Chemicals, Inc.||APD||July 14|
|Consumer Discretionary Select Sector SPDR||XLY||July 13|
|Sony Corp.||SNE||July 13|
|SunPower Corp.||SPWR||July 13|
|Walmart, Inc.||WMT||July 8|
|Big Lots, Inc.||BIG||July 1|
|Tandem Diabetes Care, Inc.||TNDM||July 1|
|Dell Technologies, Inc.||DELL||June 30|
|Danaher Corp.||DHR||June 24|
|Lowe’s Companies||LOW||June 19|
|Fiverr International, Ltd.||FVRR||June 19|
|Etsy, Inc.||ETSY||June 17|
|HubSpot, Inc.||HUBS||June 8|
|Square, Inc.||SQ||June 8|
|United Parcel Service, Inc.||UPS||June 5|
|FedEx Corp.||FDX||June 3|
|SPDR S&P Retail ETF||XRT||June 3|
|iShares MSCI Japan ETF||EWJ||May 29|
|SolarEdge Technologies, Inc.||SEDG||May 29|
|Synopsis, Inc.||SNPS||May 27|
|iShares Silver Trust||SLV||May 15|
|Agnico Eagle Mines, Ltd.||AEM||May 15|
|Agilent Technologies, Inc.||A||May 15|
|Qualcomm, Inc.||QCOM||May 12|
|Kinross Gold Corp.||KGC||May 11|
|Salesforce.com, Inc.||CRM||May 8|
|Facebook, Inc.||FB||May 7|
|Spotify Technology S.A.||SPOT||May 5|
|Dollar General Corp.||DG||Apr. 28|
|ServiceNow, Inc.||NOW||Apr. 27|
|Five9, Inc.||FIVN||Apr. 24|
|Chewy, Inc.||CHWY||Apr. 24|
|Tesla, Inc.||TSLA||Apr. 23|
|VanEck Vectors Semiconductor ETF||SMH||Apr. 17|
|Veeva Systems, Inc.||VEEV||Apr. 17|
|Okta, Inc.||OKTA||Apr. 16|
|Target Corp.||TGT||Apr. 16|
|VanEck Vectors Gold Miners ETF||GDX||Apr. 14|
|Invesco QQQ Trust||QQQ||Apr. 14|
|DocuSign, Inc.||DOCU||Apr. 3|
|Zscaler, Inc.||ZS||Apr. 3|
|Apple, Inc.||AAPL||Mar. 27|
|Nvidia Corp.||NVDA||Mar. 27|
|Zoom Video Communications, Inc.||ZM||Mar. 19|
|iShares MSCI Emerging Markets ETF||EEM||Mar. 19|
|Newmont Corp.||NEM||Jan. 13|
|SPDR Gold Shares ETF||GLD||Jan. 2|
|Microsoft Corp.||MSFT||Feb. 22|
|* Click each symbol for current chart.|