Bulletin
Investor Alert

New York Markets Close in:

Michael Ashbaugh

The Technical Indicator Archives | Email alerts

July 21, 2020, 12:25 p.m. EDT

Charting a bull-flag breakout, S&P 500 extends rally as volatility recedes

Focus: Europe’s slow-motion breakout attempt, Retail sector presses major resistance, IEV, XRT, SONO, FAST, FVRR

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    S&P 500 Index (SPX)
  • X
    Dow Jones Industrial Average (DJIA)
  • X
    NASDAQ Composite Index (COMP)

or Cancel Already have a watchlist? Log In

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’ bigger-picture backdrop remains bullish, and continues to strengthen, amid recently receding volatility.

Against this backdrop, the S&P 500 has staged a bull-flag breakout — clearing major resistance (3,233) — while the Nasdaq Composite has registered its latest record close.

Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX -1.71%  hourly chart highlights the past two weeks.

As illustrated, the S&P has broken out, reaching positive year-to-date territory. The upturn punctuates a flag-like pattern, the previously tight three-session range.

Tactically, the breakout point pivots to support, an area closely matching the June peak (3,233).

Conversely, consider that Monday’s session high (3,258.6) registered just under next resistance at the February gap (3,259.8), detailed last week.

Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -2.12%  continues to digest last week’s decisive breakout.

The index has registered five straight closes atop its 200-day moving average, currently 26,230.

Consider that the prevailing pullback has been flat, likely positioning the Dow to build on its steep initial rally.

Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -1.29%  is traversing a jagged near-term backdrop.

Tactically, last week’s close (10,503) matched the 10,500 inflection point. (Also see Thursday’s session high (10,499.8).)

More broadly, the index has sustained its early-July breakout, better illustrated on the daily chart below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has absorbed last week’s respectable downdraft from record highs. Recall last Monday’s bearish engulfing pattern (long red bar) spanned 4.0% across a single session.

Tactically, the 20-day moving average and the breakout point (10,131) underpinned the pullback, preserving a bullish near- to intermediate-term bias.

More immediately, the Nasdaq’s recent whipsaw has been punctuated by Monday’s record close.

Looking elsewhere, the Dow Jones Industrial Average has sustained a decisive mid-July break atop the 200-day moving average.

To reiterate, the initial spike marked a two standard deviation breakout, encompassing consecutive closes atop the 20-day Bollinger bands.

As always, closes atop the bands signal a near-term extended posture — due to consolidate — against a bullish longer-term outlook.

The Dow’s flat prevailing pullback fits the description of “expected” price action, after a two standard deviation breakout, improving the chances of upside follow-through.

Tactically, major support broadly spans from 26,230 to 26,294, levels matching the 200-day moving average and the June gap.

Meanwhile, the S&P 500 has ventured atop resistance matching the 2019 close (3,230) and June peak (3,233).

The posture atop the 2019 close, by definition, places the S&P in slightly positive year-to-date territory. Separately, the index has reached nearly five-month highs, its best levels since Feb. 24.

The bigger picture

Collectively, the major U.S. benchmarks are acting well technically.

On a headline basis, the Nasdaq Composite has tagged its latest record close, while the S&P 500 has staged a bull-flag breakout, reaching nearly five-month highs, and positive year-to-date territory.

Meanwhile, the Dow Jones Industrial Average continues to lag slightly behind, though the index is digesting a decisive break top the 200-day moving average.

Each benchmark’s intermediate-term bias remains bullish.

Moving to the small-caps, the iShares Russell 2000 ETF /zigman2/quotes/209961116/composite IWM -2.81%  has sustained a break to one-month highs, notching four straight closes atop the 200-day moving average, currently 145.94.

Last week’s initial strong-volume spike marked a two standard deviation breakout, encompassing a single close atop the 20-day volatility bands. Bullish price action.

Similarly, the SPDR S&P MidCap 400 ETF /zigman2/quotes/201764887/composite MDY -2.72%  has tagged one-month highs.

/zigman2/quotes/210599714/realtime
US : S&P US
3,262.68
-56.79 -1.71%
Volume: 307.50M
Sept. 21, 2020 9:47a
loading...
/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,071.64
-585.78 -2.12%
Volume: 59.96M
Sept. 21, 2020 9:47a
loading...
/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
10,654.33
-138.96 -1.29%
Volume: 440,273
Sept. 21, 2020 9:47a
loading...
/zigman2/quotes/209961116/composite
US : U.S.: NYSE Arca
$ 148.99
-4.30 -2.81%
Volume: 2.35M
Sept. 21, 2020 9:47a
loading...
/zigman2/quotes/201764887/composite
US : U.S.: NYSE Arca
$ 330.72
-9.25 -2.72%
Volume: 82,372
Sept. 21, 2020 9:47a
loading...
1 2
This Story has 0 Comments
Be the first to comment
More News In
Markets

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.