Charting a bullish July start, Nasdaq extends break to record territory

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 are off to a constructive July start despite persistently uneven bigger-picture price action.

On a headline basis, the S&P 500 has reclaimed major resistance (3,155) — rising to fill the June gap — while the Nasdaq Composite extends a more decisive July break to previously uncharted territory.

Before detailing the U.S. markets’ wider view, the S&P 500’s (S&P:SPX)  hourly chart highlights the past two weeks.

As illustrated, the S&P has reclaimed major resistance (3,155), a level matching the November peak (3,154). This area pivots to first support.

Separately, the index has effectively nailed additional overhead at the top of the June gap (3,181.5). Recall that a close atop gap resistance would neutralize the early-June island reversal.

Meanwhile, the Dow Jones Industrial Average (DOW:DJIA)  has nailed its range top, an area matching the early-June gap (26,294).

Monday’s high (26,297) and the session close (26,287) registered nearby.

Separately, the blue-chip benchmark continues to challenge its 200-day moving average, currently 26,245. The prevailing retest is also detailed on the daily chart.

Not surprisingly, the Nasdaq Composite (AMERICAN:COMP)  remains the strongest major benchmark.

As illustrated, the index has extended a decisive break to record territory.

The prevailing upturn punctuates a jagged test of the breakout point (9,838) an area better illustrated below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has knifed to record territory, rising from a jagged retest of the breakout point (9,838).

Though near-term extended, and due to consolidate, the nearly straightline July start is longer-term bullish.

Overhead targets continue to project to the 10,505 and 10,610 areas, and are firmly within view.

Looking elsewhere, the Dow Jones Industrial Average remains range-bound amid a persistently weaker backdrop.

Still, the index has maintained a posture atop its 50-day moving average, a level that has underpinned the May and June lows.

Conversely, the 200-day moving average, currently 26,245, has marked an overhead sticking point. Though Monday’s close (26,287) marked the Dow’s first close higher since June 10, an extended retest remains underway.

Separately, the week-to-date peak (26,297) has matched gap resistance (26,294). Follow-through atop this area would mark technical progress.

Meanwhile, the S&P 500 has rallied atop major resistance (3,154), notching its first close higher since June 10.

Separately, the prevailing upturn has tagged the top of the June gap (3,181.5).

The early-week peak (3,182.6) has effectively matched gap resistance.

On further strength, more distant overhead matches the 2019 close (3,230) and the June peak (3,233).

The bigger picture

As detailed above, the major U.S. benchmarks are off to a constructive July start.

On a headline basis, the Nasdaq Composite has knifed decisively to record territory. Meanwhile, the S&P 500 and Dow industrials continue to broadly trend higher, though less aggressively.

Each benchmark’s intermediate-term bias remains bullish.

Moving to the small-caps, the iShares Russell 2000 ETF has maintained major support.

Tactically, its trendline tracks the 50-day moving average, currently 137.00, a level that has surpassed the breakout point (136.20).

Conversely, the small-cap benchmark remains capped by its 200-day moving average, currently 146.34.

More broadly, the prevailing backdrop is, perhaps strangely, not too different than that of the Dow industrials, a benchmark representing 30 of the largest U.S. companies.

Similarly, the SPDR S&P MidCap 400 ETF has maintained major support roughly matching the 50-day moving average.

But here again, the MDY remains capped by its 200-day moving average, currently 335.12.

Looking elsewhere, the SPDR Trust S&P 500 has rallied from a jagged test of its 200-day moving average.

The prevailing upturn places it slightly atop gap resistance (313.00). Monday’s close marked the SPY’s first close higher since early June.

Placing a finer point on the S&P 500, the index has reclaimed major resistance (3,155).

Monday’s session low (3,155) matched the inflection point to punctuate the initial breakout.

More broadly, the prevailing upturn originates from the 3,000 mark, as well as a jagged test of the 200-day moving average.

Conversely, the early-July peak (3,182) has matched the top of the June gap (3,181.5).

Follow-through atop gap resistance would neutralize the early-June bearish island reversal. (But also note that the S&P has sustained its recovery attempt, in the broad sweep, partly defined by a series of ”higher lows” and “higher highs.” The island reversal neglected to follow-through lower after the initial early-June downdraft.)

On further strength, more distant overhead matches the 2019 close (3,230) and June peak (3,233).

Separately, the S&P’s 50-day moving average, currently 3,018, is rising toward the 200-day moving average, currently 3,024, amid a pending golden cross. Though often a lagging indicator, the crossover will likely signal mid-week.

Beyond specific levels, the S&P 500’s prevailing backdrop continues to support a bullish intermediate- to longer-term bias.

Also see: Charting market cross currents, S&P 500 maintains 200-day average.

Tuesday’s Watch List

The charts below detail names that are technically well positioned. These are radar screen names — sectors or stocks poised to move in the near term. For the original comments on the stocks below, see The Technical Indicator Library.

Initially profiled March 19, the iShares MSCI Emerging Markets ETF (PSE:EEM)  has returned 38.6% and remains well positioned. (Yield = 2.9%.)

Technically, the shares have knifed to four-month highs, rising in sympathy with China’s early-week breakout.

Though near-term extended, and due to consolidate, the decisive triangle breakout signals a primary trend shift. Tactically, trendline support closely matches the 200-day moving average, currently 40.52. A sustained posture higher signals a firmly-bullish bias.

Moving to U.S. sectors, the VanEck Vectors Semiconductor ETF (NAS:SMH)  is acting well technically.

As illustrated, the group has reached record highs, rising from a tight three-week range. A near-term target projects to the 164 area on follow-through.

Conversely, trendline support closely matches the breakout point, circa 153.50, and is followed by the former range bottom (142.30). The prevailing rally attempt is intact barring a violation.

Analog Devices, Inc. (NAS:ADI)  is a well positioned large-cap semiconductor name. (Yield = 2.0%.)

As illustrated, the shares are pressing well-defined resistance matching record territory. The prevailing five-week range is a bullish continuation pattern, hinged to the steep early-June rally.

Tactically, trendline support is followed by the range bottom (115.10) and a breakout attempt is in play barring a violation.

Initially profiled May 8, Salesforce.com, Inc. (NYS:CRM)  has returned 12.4% and remains well positioned.

Technically, the shares have staged a bull-flag breakout, reaching record highs from a tight late-June range. A near-term target projects to the 202 area on follow-through.

Conversely, the breakout point (194.00) is followed by trendline support. A sustained posture higher signals a firmly-bullish bias.

Finally, FedEx Corp. (NYS:FDX)  is a large-cap transportation bellwether coming to life.

The shares started July with a massive gap atop the 200-day moving average, rising after the company’s well received quarterly results.

Though still near-term extended, the strong-volume spike is longer-term bullish, and the shares are attractive on a pullback. Tactically, the June peak (150.00) is followed by a firmer floor matching the bottom of the gap (140.75) and the 200-day moving average, currently 140.82.

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.

Still well positioned

The table below includes names recently profiled in The Technical Indicator that remain well positioned. For the original comments, see The Technical Indicator Library.