The Technical Indicator: Charting a bearish December start, S&P 500 ventures under major support

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Technically speaking, December selling pressure has surfaced following the U.S. benchmarks’ persistent November break to record territory.

Against this backdrop, each big three benchmark has ventured under major support early Tuesday — S&P 3,100, Nasdaq 8,500 and Dow 27,400 — and a close near current levels would inflict near-term damage for the first since October.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, -0.97%  hourly chart highlights the past two weeks.

As illustrated, the S&P has extended its pullback from record territory.

Tactically, the 3,100 mark matches major support. The S&P has ventured under this area early Tuesday.

Delving deeper, a near-term inflection point (3,085) is followed by gap support at 3,067 and 3,050.

Meanwhile, the Dow Jones Industrial Average DJIA, -1.34%  has started December with a slightly more aggressive downdraft.

Its first notable support matches the breakout point (27,744), and here again, the index has ventured firmly lower early Tuesday.

Delving deeper, a more significant floor matches the 27,400 mark, an area illustrated on the daily chart.

Against this backdrop, the Nasdaq Composite COMP, -0.98%  has also pulled in to its former range.

Tactically, major support matches the 8,500 mark, an area that more broadly spans from about 8,483 to 8,504. An extended retest is underway early Tuesday.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq’s November peak (8,705.9) — also the all-time high — matched its intermediate-term target at the 8,700 mark, detailed repeatedly.

(Start with the 8,243 inflection point and subtract the October closing low: 8,243 – 7785 = 458 points. Then, add the result to the breakout point: 8,243 + 458 = 8,701.)

More immediately, the Nasdaq has started December with a respectable downdraft. Tactically, the 8,500 mark is followed by gap support (8,386) and the much more important breakout point (8,339). The Nasdaq’s intermediate-term bias remains bullish barring a violation.

Looking elsewhere, the Dow Jones Industrial Average has also reversed from record highs.

Recall that the breakout point (27,400) marks major support, a level matching the July peak (27,398) and the early-November gap (27,402).

The Dow has ventured under major support early Tuesday. A close below the breakout point would raise a technical question mark.

Deeper inflection points match the September peak (27,306) and the 50-day moving average, currently 27,210.

Similarly, the S&P 500 has pulled in respectably from record territory.

Recall that the November close (3,041) matched the S&P’s intermediate-term target of 3,140, detailed repeatedly.

On further weakness, gap support (3,067) is followed by the much firmer breakout point (3,028), a level closely matching the 50-day moving average.

The bigger picture

As detailed above, December selling pressure has surfaced following the U.S. benchmarks’ persistent November break to record territory.

The downturns originate from notable target levels. For instance, the Nasdaq’s all-time high (8,705.9), established last week, has matched its 8,700 target. Similarly, the S&P 500’s November close (3,141) — its second-best close on record — matched the 3,140 target.

Both targets have been detailed repeatedly.

Separately, the downturn has registered to start December. The year-to-date price action has been punctuated by key trend shifts at turns of the month. (See, for instance, May, June, August, October and November.)

Against this backdrop, the prevailing downturn’s aggressiveness is worth tracking for potential technical damage. Each benchmark’s intermediate-term bias remains bullish, based on today’s backdrop.

Moving to the small-caps, the iShares Russell 2000 ETF has reversed from 52-week highs.

Recall that the late-November spike registered as a two standard deviation breakout, punctuated by consecutive closes atop its 20-day Bollinger bands.

Still, the small-cap benchmark has pulled back to its formerly tight range to start this month. Recall that major support matches the 158.00 mark.

Similarly, the SPDR S&P MidCap 400 ETF has pulled in to its former range from 52-week highs. In its case, a significant floor spans from about 360.50 to 361.00.

Looking elsewhere, the SPDR Trust S&P 500 has pulled in from all-time highs.

Tactically, gap support (310.26) is followed by a firmer floor spanning from about 307.00 to 307.40, detailed repeatedly. Tuesday’s early session low (307.13) has marked a thus far successful retest.

Separately, the prevailing downturn has been fueled by admittedly increased volume, though amid conspicuously tame market breadth. For instance, NYSE declining volume surpassed advancing volume by a pedestrian 2-to-1 margin.

These are not the internal earmarks of a major trend shift so far.

Placing a finer point on the S&P 500, its bigger-picture backdrop remains relatively straightforward.

To start, the index has drawn its first material selling pressure since October in the general area of the 3,140 target. A consolidation phase was due, and has surfaced to start December.

Tactically, the 3,100 mark is followed by gap support at 3,067 and 3,050.

Delving deeper, major support rests at the breakout point (3,028), a level closely matching the 50-day moving average, currently 3,033.

Collectively, a consolidation phase is underway to start December, and the downturn’s aggressiveness is worth tracking at the turn of the month. As always, it’s not just what the markets do, it’s how they do it.

Beyond near-term issues, the S&P 500’s intermediate-term bias remains bullish barring a violation of its breakout point (3,028).

Also see: Charting a persistent late-year breakout, S&P 500 tags technical target (3,140).

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 10-year Treasury note yield TNX, -7.41%  has asserted a jagged late-year uptrend, signaling increased investor risk appetite.

Recall that the yield staged a steep early-November upturn from the 50-day moving average, rising after the Federal Reserve’s latest interest-rate cut.

More immediately, the yield has maintained the 50-day moving average, currently 1.75, a level that has effectively defined the 2019 trend.

Against this backdrop, the yield has asserted a series of “higher lows” and “higher highs” amid an upward sloping 50-day moving average. An intermediate-term uptrend has been signaled by several measures. (A posture atop the 50-day, a series of “higher highs” and an upward sloping 50-day.)

Tactically, a violation of the 50-day moving average, and the late-November low (1.73), would place the trend in question. A retest is underway early Tuesday.

Moving to U.S. sectors, the VanEck Vectors Gold Miners ETF GDX, +1.69%  is showing signs of life technically.

Specifically, the group is challenging trendline resistance, a level closely matching the 50-day moving average, currently 27.20.

Underlying the upturn, its relative strength index (not illustrated) has tagged three-month highs, improving the chances of eventual follow-through.

Tactically, a breakout attempt is in play baring a violation of near-term support, circa 26.60. More broadly, the prevailing upturn originates from major support matching a nearly five-month range bottom (26.00).

Moving to specific names, Pan American Silver Corp. PAAS, +1.46%  is a well positioned large-cap Canada-based silver miner.

As illustrated, the shares have reached two-year highs, clearing resistance matching the August and November peaks.

Tactically, the 20-day moving average, currently 18.36, has defined the recent trend, and is rising toward the breakout point (19.10). The prevailing rally attempt is firmly intact barring a violation.

Nuance Communications, Inc. NUAN, -0.71%  is a mid-cap developer of conversational artificial intelligence (AI) technologies.

Late last month, the shares knifed to four-year highs, rising sharply after the company’s quarterly results. The subsequent flag pattern signals muted selling pressure, positioning the shares to build on the initial strong-volume spike.

Tactically, the top of the gap (17.07) is closely followed by the 20-day moving average (17.00) and the former range top (16.90). A sustained posture higher supports a bullish bias.

DXC Technology Co. DXC, +1.22%  is a large-cap information technology services provider. (Yield = 2.2%.)

The company was formerly known as Computer Sciences Corp. and changed its name in 2017 after a merger with the Enterprise Services business unit of Hewlett Packard Enterprise.

Technically, the shares initially spiked three weeks ago, gapping higher after the company’s second-quarter results.

The shares have since held tightly to the range top, improving the chances of incremental follow-through. Near-term support matches the range bottom (35.30) and a breakout attempt is in play barring a violation.

Finally, ConocoPhillips Corp. COP, -1.67%  is a large-cap oil and gas name showing signs of life. (Yield = 2.8%.)

As illustrated, the shares have recently knifed to two-month highs, rising from trendline support amid increased volume.

More immediately, the shares have asserted a bull flag, challenging the 200-day moving average, currently 60.16. Tactically, trendline support is rising toward the range bottom (59.50) and a breakout attempt is in play 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.