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Michael Ashbaugh

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Dec. 15, 2020, 12:20 p.m. EST

Charting a (bullish) holding pattern: S&P 500, Nasdaq nail major support

Focus: Biotech sector extends to record highs, Netflix’ stealth breakout attempt, IBB, NFLX, XLNX, TM, WSM

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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 asserted a December holding pattern, digesting early-month rallies to record territory.

In the process, the S&P 500 and Nasdaq Composite have maintained notable support matching the November peaks — S&P 3,646 and Nasdaq 12,244 — amid a still comfortably bullish intermediate-term backdrop.

Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX -0.48%  hourly chart highlights the past two weeks.

As illustrated, the S&P is digesting the early-December break to record highs.

The prevailing range has been underpinned by major support matching the November peak (3,646), detailed previously.

Monday’s session low (3,645.8) matched support to punctuate a successful retest.

Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.50%  is also traversing a jagged near-term range.

The index briefly tagged a record high Monday — by a narrow six-point margin — before reversing to close near session lows.

Tactically, the early-November peak (29,964) remains an inflection point, also detailed on the daily chart.

Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.56% has rallied from major support.

The specific area matches the November peak (12,244), detailed repeatedly.

Recall that Friday’s session low (12,246) registered nearby to punctuate a successful retest.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq is digesting a decisive late-year breakout. The initial rally encompassed seven record closes across a nine-session span.

More immediately, the November peak (12,244) — detailed previously — has underpinned the prevailing range. Bullish price action.

Delving deeper, additional support holds in the 12,108-to-12,114 area, and is followed by the firmer breakout point (12,074).

Looking elsewhere, the Dow Jones Industrial Average is digesting a less decisive December breakout.

Tactically, the former breakout point (29,964) remains an inflection point, also detailed on the hourly chart.

Separately, the Dow has maintained a posture atop the 20-day moving average, currently 29,854, a widely-tracked near-term trending indicator.

More broadly, the relatively tight December range is a bullish continuation pattern. A near-term target continues to project to the 30,700 mark.

Meanwhile, the S&P 500 is also digesting a break to record highs.

To reiterate, the prevailing range has been underpinned by the breakout point (3,646) an area matching the November peak (3,645.99) and the Dec. 1 gap (3,645.87).

The bigger picture

Collectively, the major U.S. benchmarks continue to digest previously aggressive late-year rallies to record territory.

Still, the recent pullbacks have been relatively shallow, thus far inflicting limited damage in the broad sweep.

In fact, the S&P 500 and Nasdaq Composite have both maintained their first notable support matching the November peak — S&P 3,646 and Nasdaq 12,244. (See the hourly charts.)

Moving to the small-caps, the iShares Russell 2000 ETF is also digesting a December break to record territory.

The prevailing range marks the third consecutive flag-like pattern hinged to the initial early-November breakout.

Similarly, the SPDR S&P MidCap 400 ETF has asserted a higher plateau at record territory.

Here again, the prevailing range marks the third straight flag-like pattern.

-18.19 -0.48%
Volume: 3.12B
Feb. 26, 2021 5:04p
US : Dow Jones Global
-469.64 -1.50%
Volume: 538.91M
Feb. 26, 2021 5:04p
US : U.S.: Nasdaq
+72.91 +0.56%
Volume: 5.02M
Feb. 26, 2021 5:16p
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