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Michael Ashbaugh

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Dec. 1, 2020, 12:37 p.m. EST

Market rotation persists: Nasdaq takes flight to record highs

Focus: Communications sector sustains slight breakout, Health care sector maintains key support, XLC, XLV, AMD, CRUS, DLTR, SONO

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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 continue to trend higher amid firmly-bullish late-year price action.

Against this backdrop, the Nasdaq Composite has extended a break to record territory — placing distance atop the 12,000 mark — while the S&P 500 is starting December with its latest breakout attempt.

Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX -0.81%  hourly chart highlights the past two weeks.

As illustrated, the S&P has asserted a three-week range hinged to the double bottom defined by the September and October lows.

The flag-like pattern has been punctuated by Tuesday’s early follow-through to record territory. Bullish price action.

Similarly, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.46%  has pulled in to its range from last week’s record high.

Tactically, the February peak (29,568) marks an inflection point — formerly the Dow’s record high — also detailed on the daily chart.

Conversely, notable overhead matches the former range top (29,964) established last month.

Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -1.69% has taken flight, knifing to record territory.

The index registered consecutive record closes last week, and slipped just seven points Monday, to punctuate an intraday whipsaw.

Tactically, the 12,108-to-12,114 area marks a near-term floor, levels matching the early-November peak and gap support.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has cleared its range top, reaching uncharted territory.

The upturn marks about a 1.2% breakout, confirming the primary uptrend.

Tactically, the breakout point (12,074) is followed by deeper support at 11,950, an area better illustrated on the hourly chart.

Looking elsewhere, the Dow Jones Industrial Average is digesting unusually strong November gains.

In fact, the blue-chip benchmark just notched its best monthly performance since 1987 and its best November performance since 1928. (Both prior records were punctuated by market crashes, about nine to 12 months later, respectively.)

Still, the Dow in the current case had been working from a low base. Recall the successful test of its 200-day moving average at the October low, and subsequent snap-back to record territory.

More immediately, the Dow registered a single close atop the 30,000 mark last week for the first time on record.

It has since generally held the range top in the broad sweep. A near-term target projects from the prevailing range to the 30,700 mark.

Meanwhile, the S&P 500 has registered record closes across two of the prior four sessions.

Tactically, gap support (3,594) is closely followed by the September peak (3,588).

Monday’s session low (3,594) matched gap support. (Also see the hourly chart.)

The bigger picture

Collectively, the major U.S. benchmarks continue to trend higher amid a still comfortably bullish bigger-picture backdrop.

On a headline basis, the Nasdaq Composite has broken out, reaching record territory atop the 12,000 mark.

Against this backdrop, each big three U.S. benchmark has registered a record close at some point across the prior four sessions.

Moving to the small-caps, the iShares Russell 2000 ETF is digesting a late-November break to record territory.

The prevailing leg higher builds on its initially decisive early-November breakout.

Similarly, the SPDR S&P MidCap 400 ETF has sustained its latest rally to record highs.

Here again, the MDY’s recent breakout punctuates a mid-November flag-like pattern.

/zigman2/quotes/210599714/realtime
US : S&P US
3,870.29
-31.53 -0.81%
Volume: 2.28B
March 2, 2021 5:08p
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/zigman2/quotes/210598065/realtime
US : Dow Jones Global
31,391.52
-143.99 -0.46%
Volume: 341.28M
March 2, 2021 5:08p
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/zigman2/quotes/210598365/realtime
US : U.S.: Nasdaq
13,358.79
-230.04 -1.69%
Volume: 4.37M
March 2, 2021 5:16p
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