The Technical Indicator: Charting a persistent late-year breakout, S&P 500 tags technical target (3,140)

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Technically speaking, the U.S. benchmarks’ persistent late-year breakout remains in play.

Against this backdrop, the S&P 500 has extended to its latest record high — tagging an intermediate-term target (3,140) early Tuesday — as the Russell 2000 belatedly breaks to 52-week highs amid bullish market rotation.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +0.23%  hourly chart highlights the past two weeks.

As illustrated, the S&P has extended its November breakout, tagging another nominal record high. The prevailing upturn punctuates a successful test of the breakout point (3,100).

From current levels, the former range top (3,127) marks a near-term floor.

Meanwhile, the Dow Jones Industrial Average DJIA, +0.18%  has rallied to challenge its record high.

Here again, the index has effectively maintained its breakout point (27,774).

Recall that last week’s closing low (27,766) registered nominally under support, punctuating a jagged, but ultimately successful, retest.

Against this backdrop, the Nasdaq Composite COMP, +0.30%  has broken decisively to record territory.

Consider that this week’s strong start once again punctuates a successful test of the breakout point (8,504). Last week’s closing low (8,506) registered nominally above support.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has extended its November break to all-time highs. The late-month follow-through originates from first support around the 8,500 mark.

More broadly, the prevailing breakout punctuates a bullish double bottom defined by the August and October lows. An intermediate-term target projects to the 8,700 mark, and is increasingly within striking distance.

Looking elsewhere, the Dow Jones Industrial Average has weathered last week’s slightly more aggressive pullback.

Recall that the downturn was effectively underpinned by its first notable floor, an area spanning from 27,774 to 27,800. Last week’s closing low (27,766) registered nominally lower.

More immediately, Monday’s close (28,066) marked a record close, and the Dow is challenging its absolute record peak (28,090) early Tuesday.

Meanwhile, the S&P 500 has slightly extended its break to record territory.

The late-month upturn punctuates a successful test of its first notable support around the 3,100 mark. Bullish price action.

The bigger picture

Collectively, the U.S. benchmarks’ bigger-picture backdrop remains comfortably bullish.

On a headline basis, the S&P 500 and Nasdaq Composite have concurrently tagged nominal record highs to start this week. Moreover, both benchmarks are rising from successful tests of first support — the S&P 3,100 and Nasdaq 8,500 areas. Bullish price action.

Moving to the small-caps, the iShares Russell 2000 ETF has finally come to life.

Specifically, the small-cap benchmark has knifed to 52-week highs, rising from a tight November range amid increased volume.

Notably, the late-month spike has registered as a bullish two standard deviation breakout. The IWM is vying Tuesday for a second consecutive close atop its 20-day Bollinger bands.

As always, consecutive closes atop the bands are statistically unusual, likely laying the groundwork for longer-term follow-through.

Meanwhile, the SPDR S&P MidCap 400 ETF has tagged 52-week highs, though less decisively.

Here again, the prevailing upturn punctuates a tight November range underpinned by well-defined support.

More broadly, the small- and mid-caps’ tandem resurgence signals a rotational market backdrop, strengthening the bull case.

Looking elsewhere, the SPDR Trust S&P 500 has extended a more persistent November breakout.

Recall that near-term inflection points match the mid-month gap, at 309.64 and 310.26. (See the Nov. 19 review.)

Last week’s closing low (310.27) registered just above the top of the gap (310.26) and has been punctuated by upside follow-through.

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

To start, the index has maintained its breakout point (3,100) punctuating a shallow, and apparently short-lived, late-month pullback. The successful test of first support is constructive.

More immediately, Tuesday’s early session high (3,139.3) has effectively matched the S&P’s intermediate-term target (3,140), detailed repeatedly. A slightly more distant target now projects to the 3,164 area.

Conversely, recall that major support matches the S&P 500’s breakout point, an area spanning from 3,022 to 3,028.

The ascending 50-day moving average, currently 3,023, matches major support. The S&P’s intermediate- to longer-term bias remains firmly bullish barring a violation.

Beyond technical levels, the late-year price action remains rotational, an added bull-market tailwind.

Also see: Bullish momentum persists, S&P 500 sustains break to uncharted territory.

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 MSCI Japan ETF EWJ, -0.17%  is acting well technically. (Yield = 1.5%.)

Specifically, the shares have asserted an orderly November range, digesting a rally to 52-week highs.

The prevailing upturn originates from the early-September rally atop trendline resistance, an area closely matching the 50- and 200-day moving averages. Separately, the rally punctuates a decisive break atop a nearly two-year downtrend, detailed on the weekly chart.

More immediately, the tight November range signals still muted selling pressure, despite the steep rally, likely laying the groundwork for incremental follow-through. Tactically, the 50-day moving average is rising toward the range bottom (59.20) and a sustained posture higher supports a bullish bias.

Moving to U.S. sectors, the Health Care Select Sector SPDR XLV, +0.10%  has taken flight, reaching all-time highs. (Yield = 1.5%.)

Technically, the group has staged a bull-flag breakout, knifing from the tight early-November range.

Against this backdrop, the prevailing upturn has registered as a two standard deviation breakout, encompassing two closes atop the 20-day Bollinger bands over the prior seven sessions.

As always, closes atop the Bollinger bands signal a tension between time horizons. Though near-term extended, the statistically unusual rally is longer-term bullish, and the group is attractive on a pullback. Tactically, near-term support (97.50) is followed by the firmer breakout point (95.70).

Moving to specific names, Target Corp. TGT, +1.58%  is a large-cap retailer taking flight. (Yield = 2.1%.)

As illustrated, the shares have recently gapped sharply higher, knifing to record territory after the company’s third-quarter results.

Though still near-term overbought, the shares are attractive on a pullback. Tactically, the top of the gap (118.36) is followed by the deeper breakout point, circa 114.00.

Slightly more broadly, consider that the November gap marks Target’s second straight earnings-fueled spike.

Initially profiled Nov. 1, Teladoc Health, Inc. TDOC, +0.50%  has added 7.1% and remains well positioned.

Late last month, the shares knifed to 52-week highs, rising after the company’s strong quarterly results.

The subsequent flag has been punctuated by this week’s follow-through amid increased volume. Tactically, a near-term floor (81.00) is followed by the range bottom (77.50) and a sustained posture higher supports a bullish bias.

Finally, MKS Instruments, Inc. MKSI, -0.09%  is a large-cap developer of process control solutions.

Technically, the shares have recently knifed to 17-month highs, gapping sharply higher after the company’s third-quarter results.

The ensuing pullback places the shares at an attractive entry near the top of the gap (102.10) and 8.2% under the October peak. Delving slightly deeper, the 50-day moving average, currently 100.70, has marked an inflection point, and the prevailing rally attempt is firmly 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.