By Michael Ashbaugh, MarketWatch
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Technically speaking, the major U.S. benchmarks have weathered a respectable market whipsaw to start the worst six months seasonally — May through October.
Against this backdrop, the S&P 500 has maintained key support (2,793) amid a May pullback that has inflicted limited technical damage in the broad sweep.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +1.05% hourly chart highlights the past two weeks.
As illustrated, the S&P has absorbed a respectable pullback from major resistance (2,954).
The April peak (2,954.86), established last week, matched resistance.
Conversely, the downturn has been underpinned by the S&P’s 50% retracement of the 2020 crash (2,793). This area remains a downside inflection point.
Similarly, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.44% has pulled in to its former range.
Within the range, recall that last week’s low (23,645) closely matched the Dow’s 20% pullback mark (23,640).
Delving deeper, the downturn has been underpinned by the 23,340 area, a level roughly matching several former gaps, also detailed on the daily chart (23,328).
True to recent form, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.66% remains the strongest major benchmark.
Tactically, a familiar inflection point closely matches the November peak (8,705), also detailed below.
Monday’s close (8,710) registered nominally higher, and the index has extended its upturn early Tuesday.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has absorbed a respectable early-May downturn. In the process, the index has whipsawed near the 8,705 inflection point.
More broadly, familiar deeper support points remain in play:
The 50% retracement of the 2020 crash (8,235).
Former resistance matching the September peak (8,243).
The late-2019 breakout point (8,339).
The 200-day moving average, currently 8,432.
Combined, major support broadly spans from about 8,240 to 8,430. A sustained posture atop this area signals a bullish intermediate-term bias.
Recall that the mid-April closing low (8,263) registered slightly atop major support, punctuating a successful retest.
Looking elsewhere, the Dow Jones Industrial Average has balked at next resistance.
The specific area matches the June 2019 low (24,680) and the February low (24,681).
Conversely, two downside inflection points stand out:
The 50-day moving average, currently 23,279.
Gap support, circa 23,328, an area also detailed on the hourly chart (23,340).
The week-to-date low (23,361) has registered slightly above support, punctuating a successful retest.
Deeper support matches the mid-April low (22,941). An eventual violation would mark a material “lower low” — combined with a posture under the 50-day moving average — raising a technical caution flag.
Meanwhile, the S&P 500’s recovery attempt has thus far stalled at next resistance (2,954).
The April peak (2,954.86) matched the inflection point, and the index has pulled in respectably.
The bigger picture
As detailed above, the major U.S. benchmarks have weathered a respectable early-May market downdraft.
Recall that May marks the beginning of the markets’ worst six months seasonally, a U.S. and global-market phenomenon.
Seemingly on cue, aggressive selling pressure surfaced May 1, in the form of a nearly 12-to-1 down day. (A down day means that NYSE declining volume surpassed advancing volume by the stated margin.)
As detailed previously, the May 1 downturn marked the strongest selling pressure since the April 1 session, to start the second quarter. That session was also fueled by nearly 12-to-1 negative breadth, though downside follow-through failed to register. In fact, the April 1 session low defined the April low, and the U.S. benchmarks have subsequently extended their recovery attempt.
Moving to the small-caps, the iShares Russell 2000 ETF has also pulled in from the April peak.
The downturn has initially been underpinned by support — the 123.10-to-124.88 area — levels matching the 50-day moving average and the breakout point. The successful retest preserves the prevailing rally attempt.
Similarly, the SPDR S&P MidCap 400 ETF has pulled in to a thus far successful test the 50-day moving average, currently 283.40.