The Technical Indicator: Bull trend confirmed: S&P 500, Nasdaq extend decisive late-year breakouts

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Technically speaking, the major U.S. benchmarks have taken flight, registering a persistent late-year rally punctuated by shallow, and short-lived, pullbacks.

Against this backdrop, each big three U.S. benchmark has concurrently tagged record highs — and is traversing previously uncharted territory — amid still conspicuously muted December selling pressure.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +0.12%  hourly chart highlights the past two weeks.

As illustrated, the S&P has extended its break to record territory.

This week’s follow-through punctuates a successful test of the breakout point (3,154). Delving slightly deeper, the S&P’s former target (3,140) matches the November close (3,141).

Meanwhile, the Dow Jones Industrial Average DJIA, +0.26%  has also broken out, though belatedly. Monday’s close marked its first record close since late November.

Tactically, the breakout point (28,175) is followed by a near-term floor, circa 28,035.

Against this backdrop, the Nasdaq Composite COMP, +0.05%  has extended a mid-December breakout, notching three straight record closes.

Near-term support matches the top of the gap (8,789) and is followed by the breakout point (8,705) a level also detailed on the daily chart below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has taken flight, extending a break to record territory. The chart illustrates a bullish 1.2% mid-December breakout, confirming its primary uptrend.

Tactically, recall that the November breakout punctuated a double bottom defined by the August and October lows. The 8,705 area closely matched its projected target from the October low, and remains an inflection point.

More immediately, a near-term target projects from the December low to the 8,890 area, as detailed previously.

Looking elsewhere, the Dow Jones Industrial Average has cleared its range top, reaching previously uncharted territory.

This week’s follow-through punctuates a bullish continuation pattern pinned to the steep November rally. Tactically, the former range top (28,175) pivots to notable support.

Meanwhile, the S&P 500 has knifed more decisively to record highs. Like the Nasdaq, the S&P 500 has registered a 1.2% mid-December breakout, confirming its primary uptrend.

The prevailing follow-through punctuates a tight range, a flag-like pattern pinned to the early-December bullish reversal.

The bigger picture

Collectively, the U.S. benchmarks’ late-year backdrop remains firmly bullish.

On a headline basis, the S&P 500 and Nasdaq Composite have notched three straight record closes, while the Dow Jones Industrial Average has belatedly broken out, though it is vying Tuesday for a second straight record close.

Moving to the small-caps, the iShares Russell 2000 ETF IWM, +0.26%  has staged a bull-flag breakout, reaching 52-week highs on increased volume.

The prevailing upturn punctuates a successful test of major support (158.00).

Also recall that the late-November upturn punctuated a two standard deviation breakout, encompassing consecutive closes atop the 20-day Bollinger bands. The “expected” upside follow-through is underway.

More broadly, the small-cap benchmark is traversing less-charted territory, illustrated on the three-year chart.

Similarly, the SPDR S&P MidCap 400 ETF has reached 52-week highs amid increased volume. The prevailing upturn punctuates a successful test of gap support (366.40).

On further strength, the MDY’s record close (373.52) and absolute record peak (374.10) are increasingly within striking distance, as illustrated on the three-year chart.

Looking elsewhere, the SPDR Trust S&P 500 has rallied to all-time highs amid increased volume.

To reiterate, a near-term target projects to the 321.40 area.

Conversely, the breakout point (315.48) pivots to first support, and is followed by deeper floors around 310.30 and 307.00.

Placing a finer point on the S&P 500, its backdrop remains firmly bullish, and relatively straightforward.

The mid-December breakout punctuates a flag-like pattern hinged to the 3,141 inflection point. Notable support broadly spans from about 3,141 to 3,154, an area that has already been successfully retested. (Recall that Friday’s session low (3,156.5) registered slightly above support.)

Delving deeper, a more important floor matches the December low (3,070) and the ascending 50-day moving average, currently 3,073. The S&P’s intermediate-term bias remains bullish, based on today’s backdrop, barring a violation of this area.

On further strength, the S&P 500’s next targets project from the December low to the 3,215 and 3,237 areas, detailed previously.

More broadly, the U.S. sub-sector backdrop continues to strengthen amid price action across asset classes that remains bullish, as partly detailed last week.

Also see: Bull trend intact: S&P 500 absorbs December whipsaw.

Tuesday’s Watch List

The charts below detail names that are technically well positioned. These are radar screen names — sectors or stocks poised to move in the near term. For the original comments on the stocks below, see The Technical Indicator Library.

Drilling down further, the iShares Europe ETF has broken out, rising as the Brexit saga seems to have reached a clear path to resolution.

Specifically, the shares have knifed to 18-month highs, amid increased volume, rising from a formerly tight range.

Underlying the upturn, the relative strength index (not illustrated) has registered its best levels since March, improving the chances of longer-term follow-through. Though near-term extended, and due to consolidate, a pullback toward the breakout point (33.25) would offer an attractive entry.

In related price action, the iShares MSCI United Kingdom ETF is also digesting a decisive December breakout.

Initially profiled Oct. 21 — amid a slight break atop the 200-day moving average — Tesla, Inc. TSLA, -1.03%  has returned 48.4% and remains well positioned.

As illustrated, the shares have knifed to 16-month highs, a move building on the late-October earnings-fueled breakout.

More broadly, the December upturn places Tesla’s record high (389.61) within striking distance, as detailed on the 10-year chart. (Major resistance technically spans from 387.46 to 389.61, levels matching the 2018 and 2017 peaks, respectively.)

As always, the response to major resistance is worth tracking. The chances of follow-through improve to the extent the shares hold tightly to the range top.

Tactically, notable support matches the former range top (359.50) and a potentially consequential breakout attempt is in play barring a violation.

Autodesk, Inc. ADSK, -1.43%  is a well positioned large-cap software vendor.

Late last month, the shares staged a strong-volume breakout, reaching record highs after the company’s third-quarter results.

The subsequent tight range is a continuation pattern, punctuated by this week’s upside follow-through. A near-term target projects to the 190 area.

Tactically, the breakout point (180.90) is followed by the former range bottom (175.30) and a posture higher supports a bullish bias.

Initially profiled Sept. 3, Lam Research Corp. LRCX, +1.60%  has returned 33.5% and remains well positioned. (Yield = 1.6%.)

Technically, the shares staged a late-October breakout, gapping sharply higher after the company’s quarterly results.

More immediately, the shares have rallied to the range top, rising to challenge all-time highs amid increased volume.

Tactically, near-term support, circa 272.00, is followed by the ascending 50-day moving average, a level that has underpinned the prevailing uptrend. A breakout attempt is in play barring a violation of the 50-day.

Finally, iRobot Corp. IRBT, -0.08%  is a mid-cap manufacturer of robots for the consumer market, including vacuuming and pool-cleaning robots.

As illustrated, the shares have cleared trendline resistance, and the 20-day moving average, raising the flag to a trend shift.

Underlying the upturn, the relative strength index (not illustrated) has registered seven-month highs, improving the chances of incremental follow-through.

Tactically, the 20-day moving average, currently 46.80, has effectively defined the recent trend, and the recovery attempt is intact barring a violation.

Editor’s Note: This is a free edition of The Technical Indicator, a daily MarketWatch subscriber newsletter. To get this column each market day, click here.

Still well positioned

The table below includes names recently profiled in The Technical Indicator that remain well positioned. For the original comments, see The Technical Indicator Library.