By Michael Ashbaugh, MarketWatch
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Technically speaking, the major U.S. benchmarks have rallied respectably from the September low, rising in the wake of a damaging market downdraft.
Against this backdrop, the S&P 500 and Dow industrials have reached key technical tests — closely matching the 50-day moving average — areas defining the immediate bull-bear battleground.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX -0.61% hourly chart highlights the past two weeks.
As illustrated, the S&P has rallied to challenge the 50-day moving average, currently 3,355.
Monday’s close (3,351.6) registered slightly under the 50-day, and a retest remains underway.
The prevailing upturn punctuates a jagged, but successful, test of major support (3,233).
Similarly, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.57% has reached a key technical test.
In its case, the 50-day moving average, currently 27,562, closely matches the June peak (27,580). This area is also detailed on the daily chart.
Monday’s close (27,584) effectively matched resistance, and an extended retest remains in play.
Combined, the S&P 500 and Dow industrials have reached notable overhead matching the 50-day moving average.
Meanwhile, the Nasdaq Composite’s /zigman2/quotes/210598365/realtime COMP -0.95% backdrop has strengthened slightly versus the other benchmarks.
As illustrated, the index has reclaimed its 50-day moving average, currently 11,043. The upturn snaps a stretch of seven straight closes under the trending indicator.
Slightly more broadly, the prevailing rally punctuates a double bottom — the W formation — defined by the September low (10,519). Thursday’s session low (10,520) matched support.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq is digesting an aggressive September downturn, spanning as much as 12.9% from its record high.
Against this backdrop, the prevailing upturn places the index atop gap resistance (10,974) and the 50-day moving average.
As always, the 50-day moving average is a widely-tracked intermediate-term trending indicator. The reversal higher strengthens the bull case. (The 50-day has marked a September inflection point, initially offering support, then pivoting to resistance.)
Tactically, follow-through atop the mid-September peak (11,245) would mark a “higher high” more firmly neutralizing the September downdraft.
Looking elsewhere, the Dow Jones Industrial Average has also reversed from the September low.
From top to bottom, the index had dropped as much as 2,662 points, or 9.1%, from its seven-month high, established Sept. 3.
Tactically, major resistance closely matches the 50-day moving average, currently 27,562, and the breakdown point (27,580).
Monday’s close (27,584) matched resistance, and a retest remains underway. The Dow’s intermediate-term bias remains bearish-leaning pending material follow-through atop this area.
Meanwhile, the S&P 500 has absorbed a downturn spanning as much as 10.6% from its record peak.
To reiterate, the prevailing upturn places the 50-day moving average, currently 3,355, under siege. Monday’s close (3,351.6) registered nominally lower.
More broadly, the S&P has maintained major support matching the June peak (3,233).
The bigger picture
As detailed above, the major U.S. benchmarks have rallied respectably from the September low.
Against this backdrop, the S&P 500 and Dow industrials are retesting notable resistance matching the 50-day moving average from underneath.
To reiterate, an immediate reversal atop the 50-day — on the first retest — would signal waning selling pressure, strengthening the bull case.
Moving to the small-caps, the iShares Russell 2000 ETF has maintained gap support (141.98).
Recall that last week’s low (142.09) registered fractionally atop support.
More immediately, the small-cap benchmark is pressing resistance matching the July peak (150.20). The prevailing upturn punctuates last week’s whipsaw at the 200-day moving average.
Similarly, the SPDR S&P MidCap 400 ETF has weathered a jagged test of its 200-day moving average, currently 330.64.
Last week’s close (330.75) effectively matched the 200-day, and the MDY has reversed higher this week.