By Michael Ashbaugh, MarketWatch
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CINCINNATI (MarketWatch) -- Despite Friday's severe sell-off, the major U.S. benchmarks stabilized on Monday, holding notable support.
Yet while the U.S. markets' ability to hold support is constructive, the near-term technical backdrop still needs repairs before the groundwork is laid for another leg higher.
All told, this remains a wait-and-see market near-term within the context of a primary uptrend.
The S&P 500's hourly chart above serves as a detailed view of the past three weeks.
After violating its former uptrend last week, the S&P has sold off sharply.
Its losses accelerated with Friday's breakdown, while the index rallied modestly on Monday.
From current levels, first support holds at 1,490 while the S&P will likely draw sellers on rallies to its breakdown point around 1,526.
Similarly, the Dow industrials have broken down on this near-term view.
From Monday's close of 13,566, first resistance holds around 13,700 matching the June and August highs.
That's followed by additional overhead at the breakdown point, around 13,860.
And not surprisingly, the Nasdaq has pulled in from recent highs.
Nonetheless, the index has maintained support around the July high and the 2,750 level.
Unlike the other benchmarks, the Nasdaq remains within its three-week range.
Widening the view to the daily time frame adds perspective to the Nasdaq's price action.
Despite its recent pullback, the Nasdaq has managed to hold support.
Again, Friday's close came in at 2,725 -- just a point above the July peak -- and with Monday's 28-point rally, the index edged slightly back atop the 2,750 mark.
Recent weakness follows the Nasdaq's key reversal, the long red bar that marks the October peak.
Meanwhile, the Dow industrials wider view is uglier than the Nasdaq's.
With recent losses, it's dropped to retest the mid-September breakout point, around 13,450.
And surprisingly, Monday's close of 13,566 placed the Dow just one point above its 50-day moving average.
From current levels, first support still holds around 13,450 followed by another floor at the June low of 13,250.
As for the S&P 500, its wider view matches the Dow's.
Upon failing to hold the 1,540 support, it has sold off sharply, dropping to retest the mid-September breakout point.
Yet from current levels, the S&P faces notable support spanning from 1,484 to 1,497, a band that brackets the following levels:
Its 50-day moving average, currently 1,497.
The early-September high of 1,496.
The June low of 1,484.
If the index can stabilize around that 13-point band, then the current pullback likely marks a buying opportunity.
Yet on a failure to hold that area, its 200-day moving average, currently 1,477, rests surprisingly near prevailing levels. As always, a violation of the 200-day would place the S&P's primary uptrend in question.
The bigger picture
With recent loses, the U.S. markets have pulled in sharply.
Specifically, from the October high to Monday's low:
The Dow industrials had dropped 791 points, or 5.6%.
The Nasdaq had lost 136 points, or 4.8%.
The S&P 500 had dropped 86 points, or 5.5%.
And following the current 5% pullback, each benchmark has dropped to levels that before the fact would have marked a good entry point.
Specifically, the Dow and the S&P have pulled in to their mid-September breakout points, while the Nasdaq has dropped to the July peak. (Each area is illustrated on the daily charts above.)