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Michael Ashbaugh

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Feb. 11, 2020, 12:41 p.m. EST

Charting a bull-flag breakout, S&P 500 extends to record territory

Focus: Industrials challenge record highs, Energy sector’s technical breakdown, IBM digests strong 2020 start XLI, XLE, IBM, LITE, TEAM, SHAK

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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 major U.S. benchmarks have extended a sharp rally from well-defined support, rising as the recent market volatility spike continues to fade.

Against this backdrop, the S&P 500 and Nasdaq Composite have reached record highs — previously uncharted territory — while the Dow industrials’ latest breakout attempt is currently underway.

Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX -0.30%  hourly chart highlights the past two weeks.

As illustrated, the S&P has edged to its latest record high.

The prevailing upturn punctuates a bull flag — the tight four-session range — hinged to the steep early-February rally. Tactically, the former range top (3,337) remains an inflection point.

Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.57%  has not broken out. Still, the index is holding its range top amid a comfortably bullish backdrop.

Consider that Monday’s session low (29,995) closely matched gap support at the 29,000 mark.

On a more granular note, recall that the Dow’s record close (29,379) has registered just above the January peak (29,373). This area is closely followed by the absolute record peak (29,408).

True to recent form, the Nasdaq Composite’s /zigman2/quotes/210598365/realtime COMP +0.09%  backdrop remains the strongest.

The index has sustained a recent break atop the January peak (9,451), outpacing the other benchmarks. This week’s follow-through to record territory confirms the prevailing uptrend.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has extended its February break to record territory. The prevailing upturn originates from its former breakout point (9,093). The late-January low (9,088) registered within five points.

More immediately, the Nasdaq’s early-month breakout point (9,450) pivots to support.

Separately, recall that the marquee 10,000 mark is increasingly within view. Monday’s close (9,628) registered about 3.9% under the milestone.

Looking elsewhere, the Dow industrials continue to lag slightly behind against a comfortably bullish backdrop.

To reiterate, the Dow’s record close (29,379) has narrowly surpassed the January peak (29,373). The index is vying for its latest record close this week.

Slightly more broadly, the February rally originates from support matching the November peak (28,175). The prevailing upturn is directionally sharp, encompassing a decisive rally atop the former breakdown point (28,872). Bullish price action.

Meanwhile, the S&P 500 has extended its bullish reversal, rising to tag its latest record high.

The prevailing upturn originates from major support (3,215) and has been punctuated by a flag pattern, also illustrated on the hourly chart. Bullish price action.

The bigger picture

Collectively, the major U.S. benchmarks are off to a strong February start.

On a headline basis, the S&P 500 and Nasdaq Composite have extended their uptrends, tagging record highs. Meanwhile, the Dow Jones Industrial Average continues to lag slightly behind, though its latest breakout attempt is underway.

All trends technically point higher for each of the big three U.S. benchmarks.

Moving to the small-caps, the iShares Russell 2000 ETF remains the weakest widely-tracked U.S. benchmark.

Still, the index has managed to maintain a posture atop its 50-day moving average, currently 164.84. As always, the 50-day is a widely-tracked intermediate-term trending indicator.

Conversely, the former breakdown point (167.12) has effectively capped the recent rally attempt.

Similarly, the SPDR S&P MidCap 400 ETF has staged a comparably lackluster February rally, struggling to reclaim its breakdown point (377.60).

But here again, the MDY has reclaimed its 50-day moving average, currently 374.42, punctuating a fleeting late-January whipsaw under the trending indicator.

Combined, the small- and mid-caps are not challenging record highs, unlike the big three U.S. benchmarks.

-11.60 -0.30%
Volume: 2.29B
Jan. 22, 2021 4:59p
US : Dow Jones Global
-179.03 -0.57%
Volume: 436.04M
Jan. 22, 2021 4:59p
US : U.S.: Nasdaq
+12.15 +0.09%
Volume: 5.51M
Jan. 22, 2021 5:16p
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