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Michael Ashbaugh

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Sept. 15, 2015, 11:55 a.m. EDT

Charting the S&P’s tenuous backdrop ahead of the Fed

Focus: Biotech, IBB, CLVS, ADXS, CDW, VG, KLAC

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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.

The U.S. markets have established a holding pattern, of sorts, ahead of the Federal Reserve’s policy decision due out Thursday.

Against this backdrop, the S&P 500 Index and Dow Jones Industrial Average have established well-defined resistance, areas that define the immediate bull-bear battleground.

Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +0.56%  hourly chart highlights the past two weeks.

As illustrated, the S&P’s trading range has narrowed ahead of the Fed’s widely-anticipated policy statement.

From current levels, initial resistance rests at 1,971, and is followed by its three-week range top, spanning from 1,988 to 1,993.

Meanwhile, the Dow industrials’ /zigman2/quotes/210598065/realtime DJIA +1.32%  near-term backdrop is similar.

Here again, the index is capped by first resistance at 16,460, a level matching the August weekly closing low.

Additional overhead rests at its three-week range top of 16,670, a level that capped the Dow last week. (It topped last week just six points lower.)

And the Nasdaq Composite’s /zigman2/quotes/210598365/realtime COMP +0.06%  near-term backdrop remains slightly stronger.

The index continues to challenge major resistance matching the 2014 peak, an area also illustrated on the daily chart below.

Widening the view to six months adds perspective.

On this wider view, significant resistance spans from 4,815 to 4,828, matching the 2014 peak, and the Nasdaq’s post-breakdown closing high. (The index topped Monday just four points higher.)

On further strength, additional overhead rests at last week’s high (4,862) and is followed by the 200-day moving average, currently 4,916.

Moving to the Dow, it’s digesting the August breakdown, but remains capped by resistance.

Initial overhead rests at the August weekly closing low of 16,460, and is followed by the Dow’s three-week range top of 16,670.

The index peaked last week just six points under the range top, and its technical bias points lower pending a close atop this area.

And the S&P 500’s backdrop closely resembles that of the Dow industrials.

In its case, resistance broadly spans from 1,971, to its three-week range top of 1,993.

Consider that last week’s closing high held at 1,969, while the S&P topped last week at 1,988. Here again, the S&P’s technical bias points lower pending a close atop this area.

The bigger picture

Though the U.S. markets have stabilized, to an extent, the major benchmarks remain capped by increasingly well-defined resistance.

Beyond the headline benchmarks, consider the small- and mid-caps:

Starting with the small-caps, the iShares Russell 2000 ETF has established resistance spanning from 115 to last week’s high of 116.42.

A break from this area would strengthen the near-term bull case, opening the path to major overhead at the 120 breakdown point. Pending such a move, the Russell 2000’s technical bias continues to point lower.

Similarly, the SPDR S&P MidCap 400 is retesting resistance spanning from 259, to last week’s high, fractionally above 261.

To the extent the small- and mid-cap benchmarks hold tightly to resistance, the chances of eventual follow-through improve.

And returning to the headline issue, the S&P 500’s backdrop remains bearish, though it’s inflection points are better-defined.

+17.67 +0.56%
Volume: 1.50B
July 14, 2020 1:52p
US : Dow Jones Global
+344.44 +1.32%
Volume: 232.62M
July 14, 2020 1:52p
US : U.S.: Nasdaq
+6.30 +0.06%
Volume: 2.57M
July 14, 2020 1:52p
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