By Michael Ashbaugh, MarketWatch
Technically speaking, the major U.S. benchmarks have extended a downturn from recent record highs, pressured amid increasingly uneven late-month price action.
In the process, each big three benchmark has challenged its breakout point, areas matching relatively well-defined bull-bear battlegrounds. The prevailing retests — across potentially the next several sessions — will likely add color.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX -1.22% hourly chart highlights the past two weeks.
As illustrated, the S&P has extended its pullback from last week’s record high.
Against this backdrop, the index has ventured under its breakout point (3,870) early Tuesday.
Delving deeper, the ascending 50-day moving average, currently 3,796, is rising toward the 3,830 support.
Meanwhile, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -1.16% has strengthened in recent sessions versus the other major benchmarks.
Tactically, recall that the breakout point (31,272) marks a notable floor.
Thursday’s session low (31,285) and Monday’s session low (31,286) registered nearby. Both downturns were punctuated by reversals to a tag nominal record high.
More immediately, the latest retest of the breakout point is underway early Tuesday.
Meanwhile, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP -1.48% remains the weakest benchmark.
Consider that the index has extended its downturn from recent record highs, violating the breakout point (13,729).
Tactically, recall that the early-February gap (13,535) marks a deeper floor.
Monday’s close (13,533) effectively matched gap support, and the Nasdaq has followed through firmly lower early Tuesday.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has extended its late-month downturn.
Tactically, the breakdown point (13,729) pivots to resistance. The pending retest from underneath should be a useful bull-bear gauge.
Conversely, the ascending 50-day moving average, currently 13,243, is followed by the former breakout point (13,208).
Likely last-ditch support matches the 2020 peak (12,973), an area from which the prevailing upturn originates. An eventual violation would mark a “lower low” raising a technical caution flag.
Separately, recall the Nasdaq’s all-time high (14,175) — established last week — has registered slightly under its projected target in the 14,200 area. (See the Feb. 5 review.)
Looking elsewhere, the Dow Jones Industrial Average has maintained its breakout point (31,272).
In fact, two of the prior three session lows have registered slightly above support, price action also detailed on the hourly chart.
More broadly, the Dow’s prevailing flag-like pattern, near record highs, is technically constructive.
Meanwhile, the S&P 500 is challenging its first notable floor.
Here again, the specific area matches its breakout point (3,870). The S&P has ventured lower early Tuesday.
The bigger picture
As detailed above, a late-month technical divergence is currently taking shape.
Put differently, the big three U.S. benchmarks have diverged — each index is doing different things — for the first time since November. (Recall the Nasdaq’s November breakout lagged behind the other benchmarks as vaccine-fueled optimism deflated the stay-at-home trade amid a rotation toward more conventional portfolio positioning.)
Against this backdrop, the Dow Jones Industrial Average has maintained its breakout point (31,272), the S&P 500 is testing its breakout point (3,870) and the Nasdaq Composite has violated its corresponding breakout point (13,730).
More broadly, each benchmark’s intermediate-term bias remains bullish, based on today’s backdrop.
Moving to the small-caps, the iShares Russell 2000 ETF continues to digest the most decisive February breakout.
To reiterate, trendline support is closely followed by the breakout point (216.70).
Meanwhile, the SPDR S&P MidCap 400 ETF has also sustained an early-month break to record territory.