By Michael Ashbaugh, MarketWatch
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Technically speaking, U.S. stocks are starting the week on the defensive, pressured amid heightened coronavirus concerns fueled partly by Apple, Inc.’s revenue warning.
Against this backdrop, each big three U.S. benchmark has staged a thus far orderly pullback from its latest record close. Though limited damage has been inflicted, the downturn is worth tracking for potential acceleration.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +0.72% hourly chart highlights the past two weeks.
As illustrated, the S&P is digesting its latest break to record territory.
Tactically, the breakout point (3,348) is closely followed by support matching the January peak (3,337). This area broadly marks the S&P’s first notable floor.
Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.89% has stalled near major resistance.
The specific area spans from about 29,373 to 29,407, levels matching the January peak and Wednesday’s gap.
Last week’s close (29,398) matched the inflection point, punctuating an initially modest pullback from record highs.
Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +1.47% has sustained a recent break to record territory, notching a record close across four of the prior five sessions.
Tactically, the breakout point (9,575) is followed by a firmer floor matching the January peak (9,451).
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has knifed decisively to record territory. Recall that the mid-February spike registered as a bullish two standard deviation breakout, encompassing four closes atop the 20-day volatility bands across a six-session span.
As always, consecutive atop the bands signal a tension between time horizons. Though near-term extended, and due to consolidate, the recently pronounced bullish momentum likely lays the groundwork for longer-term follow-through.
Tactically, the Nasdaq’s first notable floor matches the breakout point (9,451), an area also detailed on the hourly chart. The initial pullback toward support would be expected to draw buyers.
Looking elsewhere, the Dow Jones Industrial Average is digesting a less-decisive break to record highs.
Tactically, a retest of the breakout point (29,373) remains underway. The Dow has ventured under first support to start this week.
More broadly, consider that Dow 30,000 remains within striking distance. Last week’s close (29,398) has registered about 2.0% under the round number.
Meanwhile, the S&P 500 has sustained its recent break to record territory. Recall that the sharp February rally originates from major support (3,215).
From current levels, the breakout point (3,337) remains the S&P’s first notable floor.
The bigger picture
As detailed above, the major U.S. benchmarks are acting well technically against a still comfortably bullish bigger-picture backdrop.
Consider that each index tagged at least one record close last week, punctuating a steep month-to-date rally from the February low.
Moving to the small-caps, the iShares Russell 2000 ETF continues to lag behind.
Still, the small-cap benchmark has reclaimed its breakdown point (167.12), rising from a recent test of the 50-day moving average.
Similarly, the SPDR S&P MidCap 400 ETF has reclaimed its breakdown point (377.60), rising from a mid-month test of the 50-day moving average.
The MDY remains stronger than the small-cap benchmark, rising within striking distance of its record high established last month. (The Russell 2000 has not registered a record high since August 2018.)