By Michael Ashbaugh, MarketWatch
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Technically speaking, the U.S. benchmarks’ bigger-picture backdrop remains comfortably bullish as market rotation persists.
Consider that the Nasdaq Composite and S&P 500 have registered nominal record highs this week — tagging previously uncharted territory — though a pulling-teeth breakout attempt remains underway.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX -1.21% hourly chart highlights the past two weeks.
As illustrated, the S&P continues to press record highs.
Its record close (3,386.15) and absolute record peak (3,393.52) remain under siege. (In fact, Tuesday’s early session high (3,395.06) has marked a nominal intraday record high.)
Conversely, near-term support (3,360) is followed by a firmer floor matching the February gap (3,328).
Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.59% is digesting a break to five-month highs.
The prevailing five-session flag pattern positions the index to build on its initially decisive August breakout. Tactically, a near-term floor, circa 27,800, is followed by firmer support matching the June peak (27,580).
Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -2.45% has edged to an all-time high.
Consider that Monday’s close (11,129.7) eclipsed its former record peak (11,126.0) by just under four points.
Practically speaking, the breakout attempt remains underway.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has narrowly extended its August breakout.
The prevailing upturn punctuates a flag-like pattern hinged to the steep early August spike. (Recall the index started August with four straight record closes, and four consecutive closes atop the 20-day Bollinger bands , to punctuate a decisive two standard deviation breakout.)
This week’s slight follow-through positions the index to build on the early-month spike.
Tactically, the breakout point (10,840) is followed by deeper gap support (10,748). The August low (10,762) has registered slightly above the latter.
Looking elsewhere, the Dow Jones Industrial Average has sustained a break to five-month highs.
Recall that its initial breakout encompassed three straight closes atop the 20-day volatility bands , a stretch that was snapped last Tuesday.
The prevailing flag pattern — the tight one-week range, hinged to the steep early-August spike — marks the “expected” consolidation. As always, the bull flag is a continuation pattern, improving the chances of upside follow-through.
Tactically, more distant overhead matches the February gap (28,403).
Meanwhile, the S&P 500’s pulling-teeth breakout attempt remains in play.
The prevailing upturn originates from consecutive tests of gap support (3,328), an area better illustrated on the hourly chart.
The bigger picture
As detailed above, the major U.S. benchmarks are acting well technically.
On a headline basis, the Nasdaq Composite and S&P 500 have tagged nominal record highs this week, while the Dow Jones Industrial Average continues to digest a previously decisive August breakout.
Though not one-size-fits-all, the bigger-picture backdrop remains comfortably bullish.
Moving to the small-caps, the iShares Russell 2000 ETF is digesting a decisive rally to five-month highs.
The initial breakout registered as statistically unusual, encompassing two straight closes atop the 20-day Bollinger bands. (Also see comparable April, May and June breakouts.)
Tactically, downside inflection points match last week’s low (155.87) and the June peak (153.39).