By Michael Ashbaugh, MarketWatch
Technically speaking, the major U.S. benchmarks continue to trend higher amid rotational market price action.
Against this backdrop, the S&P 500 has challenged its range top early Tuesday, rising to press record territory from a shaky, but successful, test of its breakout point.
Before detailing the U.S. markets’ wider view, the S&P 500’s /zigman2/quotes/210599714/realtime SPX +1.49% hourly chart highlights the past two weeks.
As illustrated, the S&P has weathered Monday’s brief whipsaw under the breakout point (3,826) a move that swiftly filled last week’s gap.
The subsequent bullish reversal — to close near session highs — places record territory just overhead. The S&P’s latest bull-flag breakout attempt is underway early Tuesday.
True to recent form, the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +1.06% continues to lag behind.
The index briefly tagged record highs last week without technically breaking out.
The prevailing pullback preserves a range-bound near-term backdrop. Tactically, the Dow’s former range bottom, circa 30,790, remains an inflection point.
Meanwhile, the Nasdaq Composite /zigman2/quotes/210598365/realtime COMP +2.32% continues to take flight.
Technically, the index has extended its recent gap to record territory, notching four straight record closes.
The prevailing upturn punctuates a mid-month bull flag, also illustrated on the daily chart below.
Widening the view to six months adds perspective.
On this wider view, the Nasdaq has extended a bull-flag breakout, knifing to all-time highs.
The prevailing four-session spike marks a 3.1% technical breakout, confirming the primary uptrend.
Separately, the prevailing upturn also marks a two standard deviation breakout, encompassing three straight closes atop the 20-day volatility bands. (Monday’s close nearly marked a fourth straight close atop the bands, missing by just two hundredths of a point.)
Though still near-term extended — and due to consolidate at some point — the Nasdaq’s statistically unusual January rally is longer-term bullish.
Tactically, the top of the gap (13,329) is followed by the firmer breakout point (13,220).
Looking elsewhere, the Dow Jones Industrial Average continues to lag behind, pulling in modestly from last week’s nominal record high.
Still, recall that its early-January breakout marked the strongest of the big three U.S. benchmarks. (The Dow notched three straight closes atop its 20-day Bollinger bands to start January.)
So combined, the Dow’s comparably sluggish prevailing price action — as the Nasdaq takes flight — is consistent with a healthy rotational market backdrop.
Meanwhile, the S&P 500 has sustained a respectable — though not off-the-charts aggressive — technical breakout.
Recall that the prevailing upturn originates from the 20-day moving average and near-term support (3,764).
The bigger picture
Collectively, the major U.S. benchmarks continue to trend higher. Each big three U.S. benchmark has recently tagged all-time highs, though amid breakout attempts that get mixed marks for style.
On a headline basis, the Nasdaq Composite has taken flight — rising amid statistically unusual momentum — while the Dow industrials’ recent price action remains comparably sluggish. The S&P 500’s backdrop splits the difference.
Amid the rotational backdrop, each benchmark’s intermediate-term bias remains bullish.
Moving to the small-caps, the iShares Russell 2000 ETF /zigman2/quotes/209961116/composite IWM +2.44% continues to grind higher.
Last week’s close (215.00) marked a record close, and the small-cap benchmark has tagged an absolute record peak this week. Selling pressure remains flat.
Similarly, the SPDR S&P MidCap 400 ETF /zigman2/quotes/201764887/composite MDY +1.63% has asserted a bullish flag-like pattern.
The recently persistent small- and mid-cap strength is also consistent with rotational market price action.
Looking elsewhere, the SPDR Trust S&P 500 /zigman2/quotes/209901640/composite SPY +1.54% has rallied less decisively to record highs.