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Michael Ashbaugh

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July 28, 2020, 12:45 p.m. EDT

Charting a (bullish) holding pattern, S&P 500 digests break to 5-month highs

Focus: Semiconductor sector tags record high, Metals & Mining sector reclaims 200-day average, South Korea’s breakout attempt, SMH, XME, EWY, NFLX, HCA

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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.

Broadly speaking, the U.S. benchmarks are acting well technically, though amid increasingly sideways late-July price action.

Nonetheless, range-bound is bullish, against the prevailing backdrop, and the S&P 500’s intermediate-term path of least resistance continues to point higher.

Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX -1.73%  hourly chart highlights the past two weeks.

As illustrated, the S&P has staged an orderly pullback from five-month highs.

The downturn punctuates a successful test of support matching the 3,200 mark.

Conversely, a familiar overhead inflection point matches the June peak (3,233) and the 2019 close (3,230).

Similarly, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -2.18%  remains range-bound.

Still, the sideways price action punctuates a decisive mid-July breakout, better illustrated on the daily chart. The prevailing range marks a bullish continuation pattern.

True to recent form, the Nasdaq Composite‘s /zigman2/quotes/210598365/realtime COMP -1.16%  near-term backdrop is comparably jagged.

Nonetheless, the index has weathered a respectable pullback from last week’s record high (10,840).

Consider that last week’s low (10,217) closely matched support at the June peak (10,221).

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has whipsawed of late near record highs.

Recall that last week’s close marked just the second close under the 20-day moving average, currently 10,462, since April 3.

Still, the index has maintained the more important breakout point (10,131), an area followed by the ascending 50-day moving average.

Delving deeper, likely last-ditch support matches the February peak (9,838). The Nasdaq’s intermediate-term bias remains bullish barring a violation.

Looking elsewhere, the Dow Jones Industrial Average continues to digest its decisive mid-July breakout. The late-month range is a bullish continuation pattern, positioning it to build on the initial spike.

To reiterate, major support broadly spans from 26,236 to 26,294, levels matching the 200-day moving average and the June gap.

Conversely, resistance broadly spans from 27,071 to 27,102, levels matching the July and March peaks.

Separately, notice the pending golden cross — or bullish 50-day/200-day moving average crossover — an event that will likely signal next week.

Meanwhile, the S&P 500 has pulled in modestly from the July peak.

The downturn has been underpinned by the 3,200 mark, a level better illustrated on the hourly chart.

The bigger picture

Collectively, the bigger-picture technicals remain constructive, though the prevailing backdrop is not one-size-fits all.

On a headline basis, the S&P 500 and Dow industrials are digesting early-July breakouts, while the Nasdaq Composite continues to whipsaw near record territory.

Amid the cross currents, each benchmark’s intermediate-term bias remains bullish.

Moving to the small-caps, the iShares Russell 2000 ETF remains in flatlining mode, digesting a decisive break atop the 200-day moving average.

The initial strong-volume spike marked a two standard deviation breakout, and has been punctuated by a tight range amid decreased volume. Bullish price action.

Meanwhile, the SPDR S&P MidCap 400 ETF has also sustained a modest break atop the 200-day moving average.

Combined, the small- and mid-cap benchmarks are rising from support closely matching the 50-day moving average.

/zigman2/quotes/210599714/realtime
US : S&P US
3,262.16
-57.31 -1.73%
Volume: 350.78M
Sept. 21, 2020 9:51a
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,054.67
-602.75 -2.18%
Volume: 67.42M
Sept. 21, 2020 9:51a
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/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
10,668.26
-125.02 -1.16%
Volume: 496,594
Sept. 21, 2020 9:51a
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