By Michael Ashbaugh, MarketWatch
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Technically speaking, the U.S. benchmarks have registered a mid-July market whipsaw, pressured at least briefly amid the month’s first real selling pressure.
Against this backdrop, the S&P 500 has tagged next resistance (3,233) — and pulled in to its range — while the Nasdaq Composite has reversed more aggressively from its latest record high.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +1.49% hourly chart highlights the past two weeks.
As illustrated, the S&P has tagged next resistance at the June peak (3,233).
Monday’s session high (3,235) matched the inflection point, and the index reversed sharply, pulling in to the former range.
Recall that the June gap — spanning from 3,123 to 3,182 — effectively defined last week’s range.
Similarly, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.06% has staged a false breakout.
More directly, the index briefly cleared resistance, but failed to sustain the gains, pulling back to the former range.
Tactically, the early-July peak (26,297) matched the bottom of the June gap (26,294).
Separately, the Dow’s 200-day moving average, currently 26,222, has marked an overhead sticking point. An extended test remains underway.
Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +2.32% remains the strongest benchmark.
Still, the index has reversed sharply from the July peak.
Consider that Monday’s brief 1.9% intraday gain morphed into a 2.1% single-day loss. The net result is a wide-range bearish reversal — spanning 4.0% across a single session — better illustrated below.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has reversed respectably from the July peak, forming a bearish engulfing pattern.
As always, the pattern is characterized by a session open and close that encompass (or engulf) those of the prior session, and a close near the session low.
The current pattern also marks a key reversal, potentially punctuating a major trend. (Key reversals conclude trends, bearish engulfing patterns do not necessarily terminate trends.)
But also remember that the Nasdaq’s prevailing uptrend has been punctuated by bearish single-day reversal patterns that have repeatedly failed to materially follow-through.
From current levels, gap support (10,310) is followed by the breakout point (10,131). Delving deeper, the former breakout point (9,838) marks a firmer floor. The Nasdaq’s intermediate-term bias remains bullish barring a violation.
Looking elsewhere, the Dow Jones Industrial Average remains the weakest major benchmark.
As illustrated, a pulling-teeth test of the 200-day moving average, currently 26,222, remains underway. The Dow has registered just one close nominally atop the 200-day since June 10.
Also recall the early-July peak (26,297) matched gap resistance (26,294), an area also detailed on the hourly chart.
Tactically, the Dow’s recovery attempt gets the benefit of the doubt baring a violation of the 50-day moving average and the June lows. Sustained follow-through atop the 200-day moving average would strengthen the bull case.
Meanwhile, the S&P 500 has balked at next resistance, an area matching the 2019 close (3,230) and June peak (3,233).
The index subsequently reversed to its tight range defined by the June gap.
Also consider that Monday’s close (3,155) matched the mid-June range top and the November peak (3,154). Technical price action is generally bullish within an uptrend. (Though the single-day price action was admittedly not bullish.)
The bigger picture
As detailed above, respectable selling pressure surfaced to start this week.
On a headline basis, the Nasdaq Composite staged a massive bearish reversal spanning 4.0% across a single session. Though the key reversal signals a potential trend shift, the Nasdaq’s uptrend has weathered several single-day reversals without lasting consequence.
Meanwhile, the S&P 500 and Dow industrials concurrently registered false breakouts at key levels — the Dow’s 200-day moving average and S&P gap resistance (3,182).
Combined, each benchmark’s intermediate-term bias remains bullish, based on today’s backdrop, though the downturns are worth tracking for potential acceleration.
Moving to the small-caps, the iShares Russell 2000 ETF is compressing between two technical levels.
Tactically, trendline support closely tracks the 50-day moving average, currently 138.05.
Conversely, the July peak (145.70) has registered slightly under the 200-day moving average, currently 146.00.