By Michael Ashbaugh, MarketWatch
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Technically speaking, the U.S. benchmarks’ bigger-picture backdrop continues to strengthen amid market rotation.
On a headline basis, the S&P 500 has sustained a break atop its 200-day moving average — likely signaling a primary trend shift — while the Nasdaq Composite has belatedly broken out, tagging three-month highs this week.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +1.05% hourly chart highlights the past two weeks.
As illustrated, the S&P has sustained the late-May breakout.
Tactically, the May peak (3,068.7) registered just under next resistance at the December low (3,070). Tuesday’s early session high (3,072) has also effectively matched resistance.
Conversely, the S&P has sustained a break atop its 200-day moving average, currently 3,004, across four straight sessions.
Similarly, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.44% is digesting the late-May breakout.
In its case, the May peak (25,758) closely matched the February gap (25,752), detailed previously, an area also illustrated on the daily chart.
Conversely, the 25,000 mark has underpinned the Dow’s initial pullback.
Against this backdrop, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +0.66% has belatedly broken out, reaching three-month highs to start June.
The prevailing upturn punctuates a successful test of major support (9,323). Friday’s session low (9,324) matched the inflection point.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has sustained a break to three-month highs, maintaining familiar gap support (9,323).
Moreover, the index has filled the massive February gap this week. Record territory is increasingly within striking distance.
Beyond technical levels, the Nasdaq’s prevailing backdrop supports a bullish near-, intermediate- and longer-term bias.
Looking elsewhere, the Dow Jones Industrial Average diverged last week, breaking decisively atop major resistance.
To reiterate, the May peak (25,758) closely matched resistance at the February gap (25,752). The initial pullback from resistance has been orderly.
More broadly, the upturn marked a two standard deviation breakout, punctuated by a lone close atop the 20-day Bollinger bands. (The Dow narrowly missed consecutive closes atop the bands, a more definitively bullish event.)
Meanwhile, the S&P 500 has sustained a break atop the 200-day moving average, currently 3,004.
Here again, the initial breakout encompassed a single close atop the 20-day Bollinger bands.
Conversely, the S&P has initially balked at next resistance (3,070). Tuesday’s early session high (3,072) has matched resistance and modest selling pressure has resurfaced.
The bigger picture
Collectively, the bigger-picture backdrop continues to strengthen amid rotational market price action.
On a headline basis, the S&P 500 has sustained a break atop its 200-day moving average, while the Nasdaq Composite has rallied from major support (9,323). (See the hourly charts.)
Moving to the small-caps, the iShares Russell 2000 ETF is digesting a decisive late-May breakout.
Last week’s upturn marked an unusual two standard deviation breakout encompassing consecutive closes atop its 20-day volatility bands. Though near-term extended, and due to consolidate, the steep rally is longer-term bullish.
Separately, the subsequent pullback has been underpinned by the breakout point. Constructive price action.
Similarly, the SPDR S&P MidCap 400 ETF has sustained a decisive late-May breakout.