By Michael Ashbaugh, MarketWatch
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Technically speaking, the major U.S. benchmarks have extended a respectable rally attempt, rising in the wake of extensive damage.
Against this backdrop, the S&P 500 has knifed within view of its next notable resistance (2,742) from a bullish island reversal to start the second quarter.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +0.47% hourly chart highlights the past two weeks.
As illustrated, the S&P has reversed sharply from major support (2,478), reaching three-week highs.
On further strength, the S&P’s 20% pullback mark (2,709) is followed by an inflection point at 2,742.
(The March 11 close (2,741) matched resistance (2,742) immediately preceding the aggressive late-March plunge.)
Similarly, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.92% has cleared its range top.
Here again, the upturn punctuates a bullish island reversal defined by the recent gaps.
Tactically, an inflection point matches the 38% Fibonacci retracement of the 2020 plunge (22,550).
Delving deeper, notable support matches the April low (20,735). The Dow’s recovery attempt is intact barring a violation.
Similarly, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.01% has knifed to three-week highs.
From current levels, recall that the 20% pullback mark (7,854) closely matches its 38% retracement of the 2020 downdraft (7,856). This area pivots to support.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has reclaimed three key levels:
The top of the early-March gap (7,851).
The 7,855 resistance, detailed on the hourly chart.
The late-March range top (7,880).
This area broadly pivots to support.
On further strength, more distant overhead matches the September peak (8,243) and the late-2019 breakout point (8,339).
Looking elsewhere, the Dow Jones Industrial Average has also extended its recovery attempt.
The prevailing upturn originates from the April low (20,735), an area that pivots to key support.
Conversely, three overhead inflection points stand out:
The Dow’s 200- week moving average, currently 23,686.
The Dow’s 20% pullback level (23,641).
The top of the March gap (23,328).
The pending test of this area — potentially over the next several sessions — will likely add color.
Meanwhile, the S&P 500 has knifed from major support, an area broadly spanning from 2,447 to 2,478.
Amid the upturn, the S&P has reclaimed its 20-day moving average, currently 2,518, for the first time since Feb. 21. As always, the 20-day is a widely-tracked near-term trending indicator under normal market conditions.
The bigger picture
As detailed above, the major U.S. benchmarks have extended a respectable bear-market rally attempt.
Each index has spiked at least 19% from the March low amid still receding market volatility. The CBOE Volatility Index has registered a week-to-date low around 43.50.
Still, consider that the VIX’ 2018 peak (50.30) remains not too distant from current levels.
So even as volatility fades — which is positive — it remains near levels formerly signaling extreme uncertainty, not far from 11-year highs.
Collectively, a near-term recovery attempt remains underway — a bear-market rally attempt — amid a still bearish intermediate- to longer-term technical backdrop.
Moving to the small-caps, the iShares Russell 2000 ETF has reversed as much as 17.7% off the March low.
Tactically, overhead inflection points match the post-breakdown peak (117.60) and the bottom of the gap (119.96).
Similarly, the SPDR S&P MidCap 400 ETF is digesting the massive March plunge. Its consolidation phase has registered amid decreased relative volume.
Meanwhile, the SPDR Trust S&P 500 has extended a rally from three-year lows.
The prevailing upturn places it atop the 20-day moving average, currently 251.20, for the first time since February.