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Michael Ashbaugh

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Sept. 1, 2020, 12:45 p.m. EDT

Charting a rally to ‘clear skies’ territory: S&P 500, Nasdaq extend summer breakouts

Focus: Health care sector tags record high, Real estate sector presses 200-day average, XLV, IYR, AMD, SPLK, BYND, ESTC

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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 continue to trend higher, rising in the wake of consequential August breakouts.

Against this backdrop, the S&P 500 and Nasdaq Composite have tagged their latest record highs to start September, extending breaks to previously uncharted territory.

Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX -2.34%  hourly chart highlights the past two weeks.

As illustrated, the S&P has sustained a break to record highs. Tactically, an inflection point closely matches the 3,500 mark.

Conversely, near-term support is not well-defined, though the 3,468 and 3,444 areas mark potential inflection points.

Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -2.27%  has pulled in from six-month highs.

Tactically, the 2019 close (28,538) marks an inflection point, a level defining positive year-to-date territory.

Delving slightly deeper, a notable floor matches the February gap (28,403).

Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -2.70%  continues to take flight.

Its persistent breakout has tracked atop the 20- hour moving average, the hallmark of a powerful trend.

Tactically, last week’s high (11,730) marks a near-term floor. Deeper inflection points match the late-August gap — 11,507 and 11,468.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has knifed decisively to record territory, rising within striking distance of the 12,000 mark.

The index first tagged the 11,000 mark on Aug. 5, less than one month ago.

More broadly, the prevailing leg higher has marked a two standard breakout, encompassing a lone close atop the 20-day Bollinger bands. As always, consecutive closes atop the bands are more definitively longer-term bullish.

Tactically, the Nasdaq remains near-term extended, and due a cooling-off period. (See the Nasdaq’s early-August breakout — encompassing four straight closes atop the 20-day volatility bands — and subsequent flat pullback.)

But more importantly, the Nasdaq’s primary uptrend has been confirmed with the nearly straightline August spike.

Looking elsewhere, the Dow Jones Industrial Average is digesting a rally to six-month highs.

The prevailing upturn punctuates a mid-August flag pattern, underpinned by the former breakout point (27,580).

On further strength, more distant overhead matches the top of the February gap (28,892).

Meanwhile, the S&P 500 has knifed to record highs, rising slightly atop the 3,500 mark.

Like the Nasdaq, the S&P’s decisive late-August spike marked a two standard deviation breakout, encompassing a lone close atop the 20-day volatility bands.

Separately, consider that the August close (3,500) matched a projected target from the June range (3,501), detailed previously.

The bigger picture

As detailed above, the major U.S. benchmarks have taken flight, staging technically significant summer breakouts.

In the process, the S&P 500 and Nasdaq Composite have just concluded their best August performance in 36 years.

Moving to the small-caps, the iShares Russell 2000 ETF remains in consolidation mode.

Still, the small-cap benchmark has maintained trendline support. The prevailing tight range is a bullish continuation pattern, hinged to the steep early-August rally. (See the tight late-July range, and upside follow-through.)

Meanwhile, the SPDR S&P MidCap 400 ETF continues to press its range top. A prolonged test of the June peak (355.23) remains underway.

/zigman2/quotes/210599714/realtime
US : S&P US
3,311.38
-79.30 -2.34%
Volume: 586.35M
Oct. 28, 2020 10:15a
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
26,840.35
-622.84 -2.27%
Volume: 89.11M
Oct. 28, 2020 10:15a
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/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
11,122.88
-308.47 -2.70%
Volume: 878,826
Oct. 28, 2020 10:15a
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