By Michael Ashbaugh, MarketWatch
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Technically speaking, a bear-market rally attempt remains underway in the wake of an historic, and severely damaging, March downdraft.
Against this backdrop, the S&P 500 has sustained the bulk of its gains, asserting a flag-like pattern amid still muted late-month selling pressure.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +0.24% hourly chart highlights the past two weeks.
As illustrated, the S&P has extended its rally from major support (2,190). The upturn has trended atop the 20- hour moving average, signaling that near-term bullish momentum is intact.
Tactically, slightly more distant overhead rests at 2,650, a level matching the 38% Fibonacci retracement of the 2020 crash. The pending test should add color.
Similarly, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.04% has held tightly to its range top, signaling still muted selling pressure for now.
Tactically, the 22,000 area has marked an inflection point.
On further strength, firmer resistance spans from about 22,550 to 22,595.
Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.43% has reclaimed major resistance.
The specific area matches its breakdown point – the 7,700-to-7,712 area – detailed previously.
Tuesday’s early session low (7,708) has matched the inflection point. Constructive price action.
On further strength, the Nasdaq’s 20% pullback mark (7,854) closely matches its 38% retracement of the 2020 downdraft (7,856).
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has extended a reversal from 14-month lows.
To reiterate, the 7,712 area marks a bull-bear inflection point. Recently muted selling pressure near resistance signals waning bearish momentum.
More distant overhead at 7,855 is better illustrated on the hourly chart. The pending test from underneath should be a useful bull-bear gauge.
Looking elsewhere, the Dow Jones Industrial Average has sustained a reversal from three-year lows.
Against this backdrop, the index is traversing a less-charted patch. Two inflection points — illustrated on the four-year chart — remain in play.
The late-2017 breakout point of 22,179.
The 2018 low of 21,712.
Tactically, a sustained reversal atop these areas would mark progress.
Separately, consider that the Dow is vying Tuesday to snap a stretch of 16 straight 850+ point daily ranges.
Meanwhile, the S&P 500 has rallied amid technical price action.
More immediately, S&P 2,650 matches notable resistance, an area also detailed on the four-year chart in the next section.
The bigger picture
As detailed above, the major U.S. benchmarks have sustained a recovery attempt, rising in the wake of an historic March plunge.
Against this backdrop, relative market volatility continues to fade as the CBOE Volatility Index vies to register a nearly three-week low.
So collectively, a bear-market rally attempt remains in play, though sustainability, and upside follow-through, remain a question mark.
Moving to the small-caps, the iShares Russell 2000 ETF has reversed from four-year lows amid decreased volume.
From current levels, last week’s high (117.60) is followed by gap resistance at 119.96 and 124.17. Follow-through atop these areas would strengthen the backdrop.
Meanwhile, the SPDR S&P MidCap 400 ETF has reversed from six-year lows.
Here again, the bullish reversal has been fueled by progressively decreased volume.
Meanwhile, the SPDR Trust S&P 500 has rallied from three-year lows. Its reversal has been fueled by decreased, but still respectable, total volume.
Placing a finer point on the S&P 500, the index has spiked from major support.
The specific area matches the mid-2016 range top (2,190), detailed previously. To the extent the S&P eventually retests the March low — across, say, the next two months — the 2,190 area marks a major bull-bear battleground.
More immediately, the post-breakdown peak (2,637) — established last week — has registered slightly under two inflection points:
The 38% Fibonacci retracement of the 2020 crash (2,650).