The Technical Indicator: Charting a jagged 2020 start, S&P 500 nails first support

This post was originally published on this site

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.

Technically speaking, the U.S. benchmarks’ bull trend has thus far weathered a jagged 2020 start amid heightened geopolitical tensions.

Against this backdrop, each big three benchmark has initially maintained its first notable support — including S&P 3,215 — vacillating amid January selling pressure that, to this point, has inflicted limited damage.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, -0.21%  hourly chart highlights the past two weeks.

As illustrated, the S&P has rallied from its first notable support (3,215) an area detailed repeatedly.

Monday’s session low (3,214.6) punctuated a successful retest.

The bullish reversal places the S&P’s record high (3,258) within striking distance.

Similarly, the Dow Jones Industrial Average DJIA, -0.36%  has reversed from its range bottom.

Consider that Monday’s close (28,703) closely matched the 2019 peak (28,701).

On further strength, the Dow’s record peak (28,872) — established Jan. 2 — remains within striking distance.

Against this backdrop, the Nasdaq Composite COMP, +0.14%  has registered an equally jagged 2020 start.

Still, the index has thus far maintained a notable floor matching its former target (8,975) and the 2019 close (8,972.6).

Collectively, Monday’s close marked each big three U.S. benchmark’s second-best close on record.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has whipsawed near record territory to start 2020.

Tactically, a near-term floor (8,909) matches the range bottom, an area also detailed on the hourly chart. Delving deeper, the November peak (8,705.9) marks firmer support, a level matching the Nasdaq’s former projected target from the October low (8,705).

Similarly, the Dow Jones Industrial Average is off to a jagged January start, though it has sustained the late-2019 breakout.

Tactically, recall that last week’s low (28,376) closely matched gap support (28,381). The successful retest is technically constructive, preserving its latest breakout.

Meanwhile, the S&P 500 has also maintained its first notable floor.

To reiterate, support matches the December gap (3,216) and the S&P’s former projected target (3,215) detailed previously.

The week-to-date low (3,214.6) has matched support, punctuating a successful initial retest.

Also notice the three consecutive closes firmly off session lows to start 2020. Constructive price action.

The bigger picture

Collectively, the U.S. benchmarks’ bigger-picture backdrop remains constructive despite an admittedly jagged 2020 start.

Each big three benchmark quietly registered its second-best close on record Monday, largely shrugging of recent geopolitical concerns — at least for now.

Moving to the small-caps, the iShares Russell 2000 ETF remains the weakest widely-tracked U.S. benchmark.

Still, the IWM has sustained a recent break to 52-week highs. Recall that notable support spans from about 162.50 to 162.80, levels matching the top of the gap and the breakout point respectively.

Meanwhile, the SPDR S&P MidCap 400 ETF has maintained its breakout point (370.50), punctuating an orderly pullback from record highs. .

Slightly more broadly, the small- and mid-caps diverged slightly to start January, failing to register a first-day-of-the-year breakout along with the big three U.S. benchmarks.

So the relative underperformance persists against a still comfortably bullish backdrop.

Looking elsewhere, the SPDR Trust S&P 500 is digesting its latest break to record territory.

Tactically, a notable near-term floor matches the late-year low (320.15), detailed previously.

Th week-to-date low (320.36) has punctuated a successful retest.

Delving slightly deeper, the 20-day moving average, currently 320.07, has underpinned the prevailing trend. The SPY has registered just one close under the 20-day since Oct. 11.

Placing a finer point on the S&P 500, the index has whipsawed to start 2020.

Tactically, the 2019 close (3,230.8) is followed by familiar gap support (3,215).

The week-to-date low (3,214.6) has matched support, punctuating a successful retest. Constructive price action.

Delving deeper, firmer support matches the December breakout point (3,154) and is followed by the ascending 50-day moving average, currently 3,140.

Though still near-term extended — and an overdue consolidation phase remains underway — the S&P 500’s intermediate-term bias remains bullish barring a violation of these areas.

Also see: Bull trend confirmed: S&P 500, Nasdaq extend decisive late-year breakouts.

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 SPDR Gold Shares ETF GLD, +0.37%  has taken flight, knifing to six-year highs amid a flight-to-safety trade.

The strong 2020 start has been fueled by a sustained volume increase, a move building on the December trendline breakout.

Moreover, the prevailing upturn has registered as a massive two standard deviation breakout, punctuated by seven straight closes atop the 20-day Bollinger bands. The rally builds on comparably powerful May, June and August breakouts.

Against this backdrop, the shares are also well positioned on the 10-year chart, rising from a bullish continuation pattern pinned to the steep mid-2019 breakout.

Collectively, gold’s longer-term technical backdrop is distinctly bullish. Tactically, the 2019 peak (146.82) is followed by gap support at 145.40 and 144.20. (Also see the Jan. 2 review.)

Moving to specific names, FireEye, Inc. FEYE, +3.24%  is a well positioned mid-cap cybersecurity name.

As illustrated, the shares have knifed to 11-month highs, clearing resistance matching the November peak. The upturn originates from a successful test of the 50-day moving average, a level that has defined the recent trend.

Tactically, the breakout point (17.20) pivots to support, and is followed by the ascending 50-day, currently 16.62. The prevailing rally attempt is intact barring a violation.

Similarly, Fortinet, Inc. FTNT, +0.38%  is a large-cap cybersecurity name positioned to rise.

The shares initially spiked two months ago, gapping atop trendline resistance after the company’s third-quarter results.

The subsequent tight range has been punctuated by this week’s follow-through to record territory. A near-term target projects to the 114 area on follow-through.

Atlassian Corp. TEAM, +0.92%  is a large-cap Australia-based software vendor coming to life.

Technically, the shares have cleared trendline resistance and the 200-day moving average amid a volume spike. The breakout signals a trend shift.

Underlying the upturn, its relative strength index (not illustrated) has registered its best levels since July, improving the chances of incremental follow-through. Tactically, the prevailing recovery attempt is intact barring a violation of trendline support, circa 123.

Profiled Dec. 9, Splunk, Inc. SPLK, -0.12%  has edged slightly higher and remains well positioned.

The shares initially spiked six weeks ago, reaching record territory after the company’s quarterly results.

The subsequent pullback has been underpinned by the breakout point (142.00), and punctuated by a tight three-week range, positioning the shares to build on the November spike.

More broadly, the shares are well positioned on the two-year chart, rising from a continuation pattern pinned to the late-2019 breakout.

Finally, Twilio, Inc. TWLO, +1.68%  is a large-cap cloud communications name coming to life.

Specifically, the shares have edged to two-month highs, a move building on the December trendline breakout.

Underlying the upturn, its relative strength index (not illustrated) has tagged its best levels since April, improving the chances of a durable trend shift.

Tactically, the breakout point (105.00) is followed by the 50-day moving average — a level that has defined the recent trend — and Twilio’s rally attempt is intact barring a violation. (Note that the 50-day moving average’s slope has ticked higher this week, also consistent with a trend shift.)

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.