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Michael Ashbaugh

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June 18, 2019, 12:55 p.m. EDT

Charting a bull-flag breakout, S&P 500 knifes toward record territory

Focus: FAANG-related damage starts repair process, Gold challenges 52-week highs, Transports present headwind, FB, AMZN, GOOGL, GLD, XLV, IYT

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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 taken flight mid-month, rising amid persistently bullish June price action.

Against this backdrop, the S&P 500 has knifed from a tight seven-session range — a bull flag — rising within striking distance of record territory.

Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX -0.34%  hourly chart highlights the past two weeks.

As illustrated, the S&P had established a flag-like pattern, digesting the early-June spike atop the 50-day moving average. The index has ventured atop next resistance (2,912) early Tuesday.

Tactically, additional overhead (2,936) is followed by the S&P’s record close (2,945.83).

Similarly, the Dow Jones Industrial Average had flatlined, digesting a steep June rally.

Here again, the 50-day moving average, currently 25,994, generally underpinned the mid-month pullback.

The chart illustrates a bull flag — pinned to the early-June rally — laying the groundwork for this week’s follow-through.

Meanwhile, the Nasdaq Composite had flatlined slightly under major resistance.

Familiar overhead matches the March peak (7,850) and the 50-day moving average, currently 7,858. The Nasdaq has ventured firmly higher early Tuesday.

On further strength, the June peak (7,910) is followed by the more distant 8,000 mark.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq’s June price action remains bullish. The index has asserted a tight mid-month range — underpinned by gap support — laying the groundwork for this week’s follow-through, as detailed previously.

Looking elsewhere, the Dow Jones Industrial Average has sustained the June breakout.

Recall that support broadly spans from about 25,950 to 25,994, levels matching the April gap and the 50-day moving average.

To reiterate, the mid-month flag pattern — pinned to the steep trendline breakout — has positioned the Dow for this week’s follow-through.

Similarly, the S&P 500 has established a mid-month flag pattern.

Recall that last week’s low (2,874) effectively matched familiar support (2,873). Bullish price action.

The bigger picture

All told, the major U.S. benchmarks are acting well, rising amid optimism over pending China-U.S. trade progress as well as recently dovish central bank policy language. The Federal Reserve’s policy statement is due out mid-week.

Tactically, the prevailing flag-like patterns signal muted selling pressure, positioning the benchmark’s for this week’s follow-through.

Moving to the small-caps, the iShares Russell 2000 ETF has rallied less aggressively from the June low.

Still, a retest of the 200-day moving average (153.16) and 50-day moving average (154.14) is currently underway. An eventual close higher would strengthen the bull case.

Meanwhile, the SPDR S&P MidCap 400 remains stronger, sustaining a break atop the 200-day moving average.

To reiterate, additional overhead matches the 50-day moving average (349.20) and the June peak (350.95). The MDY has ventured atop this area Tuesday.

Looking elsewhere, the SPDR Trust S&P 500 remains incrementally stronger than the small- and mid-caps.

Consider that the sharp early-June rally was punctuated by a flat pullback fueled by decreased volume. The muted selling pressure is constructive, laying the groundwork for upside follow-through.

/zigman2/quotes/210599714/realtime
US : S&P US
3,004.04
-10.26 -0.34%
Volume: 1.74B
July 16, 2019 5:04p
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