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Michael Ashbaugh

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Jan. 28, 2020, 12:59 p.m. EST

Charting near-term technical damage, S&P 500 ventures under key support

Focus: Crude oil confirms bearish trend shift, 10-year yields tags three-month low, Gold extends technical breakout, China pressured amid virus concerns, USO, TNX, GLD, FXI

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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 major U.S. benchmarks have pulled in sharply from recent record highs, pressured amid the most aggressive selling pressure since October.

Against this backdrop, near-term damage has been inflicted to the S&P 500’s backdrop, though its more important intermediate-term bullish bias is intact.

Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX -0.82%  hourly chart highlights the past two weeks.

As illustrated, the S&P has pulled in sharply from record highs.

Tactically, the breakout point (3,258) pivots to resistance, a level matching Monday’s session high (3,258.8).

This is followed by the 20-day moving average, currently 3,275, and resistance matching the former range bottom (3,280). A retest of this area from underneath is underway early Tuesday.

Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.39%  has extended a pullback from record highs.

Consider that Monday’s close (28,535) registered just three points under the 2019 close (28,538), briefly placing the index in negative year-to-date territory.

From current levels, the 2019 peak (28,701) is followed by the Dow’s former breakout point (28,872), an area also detailed on the daily chart.

Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.01%  has also plunged from record highs, though this is the strongest major benchmark.

Consider that Monday’s session low (9,088) closely matched its breakout point (9,093), a level detailed repeatedly as the Nasdaq’s first notable floor. This area is also illustrated on the daily chart below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq formed a bearish key reversal to conclude last week. Recall that the session open registered as a record high, capping a single-day downdraft encompassing the prior session’s range. (In this case, the Nasdaq’s key reversal engulfed the range of the prior five sessions.)

The index subsequently gapped under its 20-day moving average, currently 9,204, notching just its second close lower since October. As always, the 20-day average is a widely-tracked near-term trending indicator.

Delving deeper, the Nasdaq has maintained its first notable floor at the breakout point (9,093), preserving a bullish intermediate-term bias.

Looking elsewhere, the Dow Jones Industrial Average has pulled in more aggressively from record highs.

In the process, the index has violated its breakout point (28,872), an area closely matching the 20-day moving average. A swift reversal atop this area would neutralize the late-month downdraft.

Delving deeper, the former range bottom (28,376) roughly matches the 50-day moving average, currently 28,396. An eventual violation of this area would raise an intermediate-term caution flag.

Meanwhile, the S&P 500 formed a bearish engulfing pattern to conclude last week. The session open and close encompassed, or engulfed, those of the prior session, raising the flag to a potential trend reversal.

The S&P subsequently gapped under its 20-day moving average, currently 3,275, and the breakout point (3,258) to start this week.

This marks the S&P’s second close under the 20-day moving average since October. (See the early-December whipsaw, and subsequent bullish reversal. A comparable swift recovery would neutralize the prevailing downdraft.)

The bigger picture

As detailed above, the major U.S. benchmarks have reversed sharply from recent record highs, pressured amid the most aggressive selling pressure since October.

In the process, notable damage has been inflicted for the first time since December, likely raising the flag to a long overdue consolidation phase — an extended chopping around period, if not a deeper pullback.

Moving to the small-caps, the iShares Russell 2000 ETF has placed distance under its breakout point (167.12).

Also consider that Monday’s close registered fractionally under the 50-day moving average — a widely-tracked intermediate-term trending indicator — for the first time since October.

The small-cap benchmark has reclaimed its 50-day early Tuesday, though the next several sessions will likely add color.

Similarly, the SPDR S&P MidCap 400 ETF has violated its breakout point (377.60), pressured amid increased volume.

Here again, Monday’s close registered fractionally under the 50-day moving average, currently 371.65, raising a technical question mark.

/zigman2/quotes/210599714/realtime
US : S&P US
2,954.22
-24.54 -0.82%
Volume: 5.14B
Feb. 28, 2020 5:06p
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
25,409.36
-357.28 -1.39%
Volume: 922.68M
Feb. 28, 2020 5:06p
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/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
8,567.37
+0.89 +0.01%
Volume: 4.49M
Feb. 28, 2020 5:16p
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