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, a pronounced August volatility spike remains in play across the global markets, as well as the widely-tracked U.S. benchmarks.
Amid the cross currents, the S&P 500 has staged a bullish reversal from major support (2,817) though the rally attempt’s durability remains an open question.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +0.47% hourly chart highlights the past two weeks.
As illustrated, the S&P is traversing a volatile August backdrop.
The prevailing rally attempt has thus far been capped by the 50-day moving average, currently 2,943.
The subsequent downturn from the 50-day has been underpinned by the 2,973 support. The week-to-date low (2,873.1) has matched the inflection point.
Similarly, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.40% has whipsawed amid volatile August price action.
In its case, the 200-day moving average has underpinned the August downdraft, an area better illustrated on the daily chart.
Tactically, an inflection point matches last week’s high (26,413) and is followed by the more distant 50-day moving average, currently 26,600.
Meanwhile, the Nasdaq Composite’s /zigman2/quotes/210598365/realtime COMP +0.87% backdrop is equally jagged.
Here again, its initial rally attempt has been capped by the 50-day moving average, currently 8,022.
The subsequent pullback has been underpinned by the bottom of the August gap (7,836). Monday’s session low (7,834) registered within two points.
Combined, the S&P 500 and Nasdaq Composite have observed well-defined support even amid the volatile backdrop.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq maintained major support (7,670) a level defining the late-2018, mini-crash range top. The August low registered within seven points.
The subsequent rally attempt has filled the August gap, an area also illustrated on the hourly chart.
Tactically, the 50-day moving average, currently 8,022, is followed by the top of the July gap (8,059), a level established to start the third quarter. Both areas have been tested early Tuesday, and a close higher would strengthen the bull case.
Looking elsewhere, the Dow Jones Industrial Average has rallied from the 200-day moving average.
The reversal has thus far been capped by the 50-day moving average, currently 26,600.
Within the range, the 26,250 area is followed by the post-breakdown peak (26,413). Tuesday’s early session high (26,427) has matched the latter, and the retest remains underway.
Meanwhile, the S&P 500 has also whipsawed from major support.
Recall that the August low (2,822) has registered nominally atop the 2,817 support, a level defining the late-2018, mini-crash range top. (This area corresponds with Nasdaq 7,670.)
The subsequent rally attempt initially registered consecutive closes atop the breakdown point (2,912) — constructive price action — though it was punctuated by Monday’s pullback to the 2,873 support.
The bigger picture
As detailed above, the major U.S. benchmarks continue to whipsaw amid a pronounced August volatility spike.
On a headline basis, the S&P 500 and Nasdaq Composite have spiked from major support — the S&P 2,817 and Nasdaq 7,670 areas — though the subsequent rally attempt gets mixed marks for style. Each benchmark initially filled the August gap, which is bullish, though Monday’s sharp downturn raises a question mark as to the rally attempt’s sustainability.
(Market bulls will contend that the S&P and Nasdaq both maintained well-defined support Monday — at S&P 2,873 and Nasdaq 7,836 — constructive price action.)
Moving to the small-caps, the iShares Russell 2000 ETF has whipsawed around the 200-day moving average, currently 151.10.