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 major U.S. benchmarks continue to digest an October breakout amid still bullish bigger-picture price action.
Against this backdrop, the S&P 500 and Nasdaq Composite have effectively nailed their first significant support — the S&P 3,428 and Nasdaq 11,460 areas — to punctuate a pullback that has thus far inflicted limited damage.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +1.49% hourly chart highlights the past two weeks.
As illustrated, the S&P has weathered its first test of the breakout point (3,428), an area detailed previously.
Monday’s close (3,427) matched support, and Tuesday’s early upturn punctuates a successful retest. Constructive price action.
Tactically, the mid-month gap (3,482) marks notable overhead, a level closely matching consecutive session closes, including the weekly close (3,483).
Similarly, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.06% has pulled in from its range top.
Tactically, the 2019 close (28,538) has marked an inflection point, a level defining positive year-to-date territory. The Dow has alternated closes lower, and higher, across three straight sessions.
Delving deeper, the 28,000 mark closely matches the 200-day moving average, currently 27,996.
Meanwhile, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +2.32% has maintained its first notable support.
The specific area spans from 11,448 to 11,460, also detailed on the daily chart below.
Monday’s session low (11,454) closely matched support to punctuate a successful retest.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq remains in consolidation mode.
As detailed repeatedly, the early-October rally marked a two standard deviation breakout, encompassing consecutive closes atop the 20-day Bollinger bands. The subsequent pullback has filled the gap.
Perhaps more notably, the mid-month downturn has been underpinned by the Nasdaq’s first notable support, circa 11,460. Constructive price action.
Delving deeper, the 50-day moving average, currently 11,270, is closely followed by the breakout point (11,245). The Nasdaq’s intermediate-term bias remains bullish barring a violation.
Looking elsewhere, the Dow Jones Industrial Average is digesting a less decisive October breakout.
Against this backdrop, the index has pulled in to its former range. Tactically, the February gap (28,403) remains an inflection point.
Delving deeper, the 50-day moving average, currently 27,996, closely matches the 28,000 mark. A posture atop this area signals a comfortably bullish intermediate-term bias.
Recall that the 50-day moving average (in blue) underpinned the May, June and late-July lows.
Meanwhile, the S&P 500 has effectively nailed its first significant support.
To reiterate, Monday’s close (3,427) matched the breakout point (3,428) to punctuate a successful initial retest.
The bigger picture
As detailed above, the major U.S. benchmarks are acting relatively well technically.
On a headline basis, the S&P 500 and Nasdaq Composite have weathered a pullback from one-month highs, effectively nailing their first significant support — the S&P 3,428 and Nasdaq 11,460 areas.
Against this backdrop, each benchmark’s intermediate-term bias remains bullish. The mid-month downturn has inflicted limited damage in the broad sweep.
Moving to the small-caps, the iShares Russell 2000 ETF has sustained a break to seven-month highs.
In the process, the small-cap benchmark has registered nine consecutive closes atop its breakout point, circa 159.80.
Similarly, the SPDR S&P MidCap 400 ETF is holding seven-month highs.
Here again, notable support matches the breakout point, circa 360.20.