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Michael Ashbaugh

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July 11, 2017, 12:48 p.m. EDT

Charting the S&P 500’s bullish backdrop amid early third-quarter cross currents

Focus: Materials hold the breakout point, XLB, PHM, AAOI, WUBA, CF ESPR

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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.

Though the prevailing backdrop is not one-size-fits-all, the U.S. benchmarks’ bigger-picture technicals, on balance, remain bullish.

On a headline basis, the S&P 500 has maintained major support — the familiar 2,405 breakout point — while the Nasdaq Composite’s recently shakier backdrop has incrementally strengthened this week.

Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX -3.37%  hourly chart highlights the past two weeks.

As illustrated, the S&P has maintained major support, rising from last week’s low of 2,407.

From current levels, the 20-day moving average, currently 2,432, matches an inflection point, and is followed by firmer overhead, circa 2,442.

Similarly, the Dow Jones Industrial Average remains range-bound. In its case, last week’s low (21,305) precisely matched near-term support.

On further strength, the Dow’s next notable resistance matches the June peak of 21,535. The blue-chip benchmark briefly ticked higher last Monday, July 3, tagging record territory during a holiday-shortened session.

Meanwhile, the Nasdaq Composite’s /zigman2/quotes/210598365/realtime COMP -3.79%  backdrop remains characteristically softer.

Still, the index has reversed from six-week lows, reclaiming the 6,164 inflection point, also illustrated on the daily chart below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has edged atop the 6,164 breakdown point, a level closely matching the 50-day moving average, currently 6,171.

Recall that the index topped Wednesday at 6,163.6, and Friday at 6,164.9.

The upturn punctuates an extended, and technically shaky, retest of major support matching the June low. Based on today’s backdrop, the Nasdaq’s intermediate- to longer-term technical bias remains bullish.

Moving to the Dow, the blue-chip benchmark remains characteristically stronger.

Recall that last week’s low (21,305) matched near-term support, better illustrated on the hourly chart.

Delving deeper, more significant support matches the 21,115 breakout point. The prevailing range is underpinned by consecutive session lows within three points.

Similarly, the S&P 500’s price action remains relatively technical.

To start, last week’s low (2,407) punctuated a second recent successful test of the 2,405 breakout point.

The S&P has subsequently reversed atop the 50-day moving average, currently 2,416, notching consecutive closes higher.

The bigger picture

Though the U.S. benchmarks’ prevailing backdrop remains slightly divergent — it’s not one-size-fits-all — the bigger-picture market technicals, on balance, remain bullish.

On a headline basis, the S&P 500 and the Dow industrials have maintained the range bottom — S&P 2,405 and Dow 21,305 — while the Nasdaq Composite has edged atop the 6,164 resistance, and the 50-day moving average.

Moving to the small-caps, the iShares Russell 2000 ETF /zigman2/quotes/209961116/composite IWM -3.64% has pulled in from the range top and last week’s record close.

Tactically, the 50-day moving average, currently 139.25, is closely followed by the range bottom, an area matching last week’s low (138.83).

Similarly, the SPDR S&P MidCap 400 has pulled in from resistance.

Here again, the 50-day moving average, currently 316.25, and the one-month range bottom, technically 314.37, mark technical inflection points.

Slightly more broadly, consider that the retests of the 50-day moving average are more a function of the relatively flat preceding 50 sessions, rather than a conventional pullback to the intermediate-term trending indicator. The small- and mid-cap benchmarks are acting well technically, in the broad sweep.

Meanwhile, the SPDR Trust S&P 500 /zigman2/quotes/209901640/composite SPY -2.98%  has thus far maintained major support.

-88.60 -3.37%
Volume: 3.59B
March 27, 2020 5:12p
US : U.S.: Nasdaq
-295.16 -3.79%
Volume: 3.45M
March 27, 2020 5:16p
US : U.S.: NYSE Arca
$ 112.56
-4.25 -3.64%
Volume: 39.93M
March 27, 2020 8:00p
US : U.S.: NYSE Arca
$ 253.42
-7.78 -2.98%
Volume: 224.34M
March 27, 2020 8:00p
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