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 U.S. benchmarks are starting the third quarter against a comfortably bullish, if still slightly uneven, bigger-picture backdrop.
On a headline basis, the S&P 500 has tagged all-time highs — reaching uncharted territory — a rally that opens the path to a projected near-term target slightly under the 3,000 mark.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +3.41% hourly chart highlights the past two weeks.
As illustrated, the S&P gapped sharply higher to start the third quarter, rising to record territory. The upturn punctuates a successful test of major support in the 2,912-to-2,916 area.
Tactically, the June peak (2,964) remains an inflection point and is followed by the top of the gap (2,952).
Meanwhile, the Dow Jones Industrial Average remains range-bound.
Consider that its record close (26,828), established Oct. 3, has marked a recent hurdle. The Dow has twice ventured higher intraday, though it has yet to close atop the inflection point.
Conversely, a near-term floor (26,527) has effectively underpinned the prevailing range.
Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +2.58% has broken out — sort of.
Specifically, the index has tagged nearly two-month highs, rising atop the June peak (8,089). Monday’s close (8,091) registered nominally higher.
Still, the Nasdaq remains capped by record territory, an area illustrated below.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has extended its steep rally from the June low. The prevailing leg higher punctuates a successful test of major support (7,850) closely matching the 50-day moving average.
Conversely, the Nasdaq’s record close (8,164, established May 3) and absolute record peak (8,176, established April 29) are now just overhead. The pending retest from underneath should be a useful bull-bear gauge.
Looking elsewhere, the Dow Jones Industrial Average is also acting well technically.
Consider that the steep June rally was punctuated by a shallow pullback from nine-month highs. The prevailing flag-like pattern lays the groundwork for potentially material upside follow-through. (See the mid-month breakout.)
The Dow’s record close (26,828.39) and absolute peak (26,951.81), both established Oct. 3, remain within striking distance to start July.
Meanwhile, the S&P 500 has rallied to a nominal record high.
The breakout punctuates consecutive tests of well-defined support. Recall that the mid-June rally originated from the 2,873 support, while the late-month upturn punctuated a successful test of the 2,912 area.
The bigger picture
Collectively, the U.S. benchmarks are off to a strong third-quarter start though the bigger-picture backdrop remains admittedly uneven.
On a headline basis, the S&P 500 has reached all-time highs, rising from a successful test of major support (2,912). Bullish price action.
Meanwhile, the Dow industrials and Nasdaq Composite have not yet reached uncharted territory, though each benchmark’s record close is now firmly within striking distance.
Moving to the small-caps, the iShares Russell 2000 ETF has shown signs of a pulse.
Specifically, the small-cap benchmark has placed distance atop its 50- and 200-day moving averages, rising amid increased volume.
Though still range-bound, the pending retest of next resistance, circa 159, will likely add color.
Meanwhile, the SPDR S&P MidCap 400 remains incrementally stronger, rising slightly atop next resistance (354.70).
The MDY’s 2019 closing peak (361.02) and absolute 2019 peak (361.52) are increasingly within view.