By Michael Ashbaugh, MarketWatch
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Technically speaking, the major U.S. benchmarks have reversed course Tuesday, rising sharply in the wake of a damaging market downturn.
Against this backdrop, the S&P 500 has ventured atop its marquee 200-day moving average, rising toward a more important test of major resistance matching the breakdown point (2,800).
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +0.28% hourly chart highlights the past two weeks.
As illustrated, the S&P has registered its most aggressive year-to-date downturn.
Technically, the index violated major support (2,800) — subsequently failed the retest from underneath — and extended under the 200-day moving average, currently 2,774.8. Bearish price action.
Delving deeper, the S&P has narrowly maintained its next notable support (2,742).
Similarly, the Dow industrials’ downturn has inflicted damage.
Recall that major support formerly matched the March low (25,208) an area also illustrated on the daily chart.
Here again, the Dow has violated major support and subsequently observed this area as resistance. An eventual close atop the breakdown point (25,208) would place the brakes on bearish momentum.
Meanwhile, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.40% has also trended persistently lower.
Like the S&P 500, the Nasdaq concluded May with a violation of the 200-day moving average, currently 7,520, notching consecutive closes under the trending indicator.
Tactically, notable resistance matches the bottom of the gap (7,507) and the 200-day moving average. A swift reversal higher would mark a step toward stabilization.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has violated the 200-day moving average, closing lower for the first time since March.
Perhaps as notably, the downturn punctuates a failed test of the breakdown point (7,670) from underneath. Bearish price action.
Tactically, an inflection point matches the December peak (7,486) and is closely followed by the 200-day moving average. On further strength, major resistance spans from 7,670 to 7,694 — also detailed on the hourly chart — and the next retest from underneath should be a useful bull-bear gauge.
Looking elsewhere, the Dow Jones Industrial Average has reached four-month lows.
The downturn resolves a modified head-and-shoulders top defined by the February, April and mid-May peaks.
The pattern’s neckline matches the March low (25,208) and pivots to resistance. To reiterate, a close atop this area would mark technical progress, signaling that bearish momentum is waning. (The Dow is currently rising from a modestly bullish relative strength index (RSI) divergence, unlike the other major benchmarks.)
On further strength, gap resistance (25,342) is followed by the 200-day moving average, currently 25,426.
Meanwhile, the S&P 500 has violated major support (2,800) and failed the initial retest from underneath. (Also see the hourly chart.)
More immediately, the S&P has narrowly maintained its next notable floor — the 2,738-to-2,742 area. Monday’s close (2,744) registered nominally higher, and Tuesday’s early upturn likely punctuates a successful retest.
The bigger picture
Collectively, the U.S. benchmarks have trended persistently lower, pressured amid trade tensions, as well as more recent regulatory concerns across the large-cap technology space.
In the process, broadly-based technical damage has been inflicted. While a corrective bounce is due, and apparently underway early Tuesday, the intermediate-term backdrop supports a bearish bias pending repairs.
Moving to the small-caps, the iShares Russell 2000 ETF has tagged four-month lows.
The downturn resolves a double top, the “M” formation defined by the February and May peaks.
Tactically, notable resistance matches the breakdown point, an area spanning from about 148.40 to 149.60. A swift reversal higher would place the brakes on bearish momentum.
Similarly, the SPDR S&P MidCap 400 has reached four-month lows.
Here again, the breakdown point pivots to resistance, an area spanning from about 335.14 to 337.34. The MDY’s initial retest from underneath is underway early Tuesday, and the next several sessions should add color.