The Technical Indicator: Charting the approach of record highs, S&P 500 rises amid market rotation

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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’ already-bullish backdrop has strengthened amid rotational August price action.

Against this backdrop, S&P 500 has registered a seven-session winning streak — rising within view of record territory — while the Nasdaq Composite pulls in, digesting a decisive early-month break to all-time highs.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +0.42% hourly chart highlights the past two weeks.

As illustrated, the S&P has extended its August breakout, notching seven straight daily gains.

In the process, the index has reached its projected target (3,360) from the late-July range, detailed previously.

The prevailing upturn punctuates a successful test of major support (3,328). Friday’s session low (3,328.7) matched the inflection point.

Meanwhile, the Dow Jones Industrial Average DJIA, +0.89% has extended a break atop major resistance.

The specific levels match the March and July peaks, an area that pivots to support.

Recall that the strong August start punctuates a jagged late-July test of the 50- and 200-day moving averages.

Against this backdrop, the Nasdaq Composite COMP, -0.02% has pulled in from record highs amid market rotation.

Still, the prevailing downturn has been orderly, and punctuates an unusually strong August start.

Recall that the breakout point (10,840) marks major support. Monday’s session low (10,849) registered slightly higher amid a successful retest.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq is digesting a decisive break to record territory.

Recall the index started August with four straight closes atop the 20-day Bollinger bands to punctuate an unusually strong two standard deviation breakout. The first four August closes also marked a record closes.

Though a consolidation phase is underway, the nearly 2.5% August breakout confirms the Nasdaq’s prevailing uptrend.

Tactically, notable support matches the breakout point (10,840) and the top of the gap (10,831). This area has initially underpinned the prevailing pullback.

(On a granular note, the Nasdaq is vying Tuesday to avoid its first three-session losing streak since March. Still, the prevailing pullback has been orderly, thus far inflicting limited damage.)

Looking elsewhere, the Dow Jones Industrial Average has reached five-month highs.

Notably, the prevailing upturn has encompassed three straight closes atop the 20-day volatility bands to punctuate another powerful August breakout.

Though near-term extended — and due a cooling-off period — the Dow’s steep rally likely lays the groundwork for longer-term gains.

More broadly, the Nasdaq started August a decisive breakout — notching four straight closes atop the Bollinger bands — then the torch was passed to the Dow industrials amid a breakout encompassing three straight closes atop the bands.

The rotational August price action is distinctly bullish. Tactically, the June peak (27,580) pivots to support.

Meanwhile, the S&P 500 is also acting well technically.

In fact, the index has rallied within striking distance of its record close (3,386.15) and absolute record peak (3,393.52). The pending retest from underneath will likely add color.

(The S&P’s August breakout has encompassed a single close atop the 20-day Bollinger bands, also signaling unusual strength, but underperforming the other two major benchmarks.)

The bigger picture

As detailed above, the major U.S. benchmarks are off to a deceptively bullish August start.

On a headline basis, the Nasdaq Composite is digesting a decisive two standard deviation breakout, initially punctuated by four straight record closes.

Meanwhile, the Dow Jones Industrial Average has more recently broken out, knifing to five-month highs amid statistically unusual strength.

Against this backdrop, the S&P 500 has rallied within striking distance of record highs amid a persistent seven-session winning streak.

So collectively, the major U.S. benchmarks have started August — a seasonally unfavorable month — on a firmly-bullish note.

Moving to the small-caps, the iShares Russell 2000 ETF has extended a break to five-month highs.

The prevailing upturn punctuates a bullish continuation pattern — the tight late-July range — underpinned by the 200-day moving average.

Meanwhile, the SPDR S&P MidCap 400 ETF is pressing five-month highs.

Recall that notable overhead matches the June peak (355.23).

Monday’s close (355.16) registered nearby, and a breakout attempt remains underway.

More broadly, the small- and mid-caps are rising amid a pending golden cross — or bullish 50-day/200-day moving average crossover — events likely to signal mid-week.

Looking elsewhere, the SPDR Trust S&P 500 has extended a break to five-month highs. Its record close (338.34) and absolute record peak (339.08) are increasingly within view.

Placing a finer point on the S&P 500, the index has started August with a grinding-higher breakout, notching seven straight daily gains.

The upturn has been punctuated by Monday’s close (3,360.5) matching the S&P’s projected target (3,360) from the July range, detailed previously.

Tactically, notable support matches the February gap (3,328). Friday’s session low (3,328.7) marked a successful retest.

Delving deeper, the breakout point (3,280) marks a firmer floor.

Slightly more broadly, the 20-day moving average, currently 3,275, is rising toward the breakout point (3,280). The 20-day is a widely-tracked near-term trending indicator, and underpinned the July price action.

Conversely, the S&P’s record close (3,386.15) and absolute record peak (3,393.52) — both established Feb. 19 — are increasingly within striking distance.

Beyond specific levels, the S&P 500 has confirmed its uptrend with a bullish 2.4% August breakout. Its intermediate-term path of least resistance continues to point higher pending signs of a bearish pulse.

Also see: Charting a solid August start: S&P 500, Nasdaq stage latest summer 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 Industrial Select Sector SPDR has come to life. (Yield = 1.9%.)

As illustrated, the shares have extended a break atop the 200-day moving average, reaching five-month highs. The upturn has been fueled by increased volume and punctuates a tight three-week range.

Tactically, trendline support closely tracks the 50-day moving average, and is rising toward the 200-day moving average. A sustained posture atop the trendline signals a bullish bias.

Meanwhile, the iShares Transportation Average IYT, +1.15%profiled last week — has taken flight.

Specifically, the group has knifed to five-month highs, clearing resistance matching the June peak.

Moreover, the nearly straightline spike marks a two standard deviation breakout, encompassing consecutive closes atop the 20-day Bollinger bands.

Though near-term extended, and due to consolidate, the strong August start confirms the group’s uptrend. Tactically, the breakout point (179.90) pivots to notable support.

More broadly, the tandem transports and industrials resurgence is consistent with improved economic growth expectations, and exemplifies the recent rotation toward cyclicals (value) and away from technology.

Drilling down within the transports, the U.S. Global Jets ETF JETS, +3.09% is showing signs of life.

As illustrated, the group has edged atop the 50-day moving average, tagging a fractional six-week high.

The strong-volume upturn comes from a tight July range — a coiled spring — laying the groundwork for potentially decisive follow-through.

Tactically, the former range top (17.30) is followed by the 50-day moving average, currently 16.98. A breakout attempt is in play barring a violation.

Initially profiled July 20, Dow 30 component Caterpillar, Inc. CAT, +0.99% has edged slightly higher and remains well positioned. (Yield = 2.9%.)

Technically, the shares have rallied to the range top, tagging a six-month high on increased volume. The upturn punctuates a bullish ascending triangle. A near-term target projects to just under the 150 mark on follow-through.

Conversely, trendline support closely matches the 50- and 200-day moving averages. The breakout attempt is intact barring a violation of this area.

Similarly, Nike, Inc. NKE, +0.30% is a well positioned Dow 30 component.

As illustrated, the shares have rallied to the range top, tagging all-time highs amid a volume spike.

The upturn punctuates a cup-and-handle pattern defined by the March and June lows. An intermediate-term target projects to the 115 area.

More broadly, the shares are well positioned on the three-year chart, rising from a continuation pattern (the tight July range) hinged to the early-2020 V-shaped reversal.

Finally, Nucor Corp. NUE, -1.06% is a large-cap steel producer coming to life. (Yield = 3.5%.)

Technically, the shares have edged atop the 200-day moving average, rising to challenge five-month highs.

As always, the 200-day is a widely-tracked longer-term trending indicator. The upturn raises the flag to a potential primary trend shift.

Follow-through atop the June peak (46.63) would mark a “higher high” more firmly signaling a trend shift. Tactically, a breakout attempt is in play barring a violation of the former range top (43.90).

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.

Company Symbol* (Click symbol for chart.) Date Profiled
Financial Select Sector SPDR XLF Aug. 10
Freeport McMoRan, Inc. FCX Aug. 10
Sanmina Corp. SANM Aug. 10
Natera, Inc. NTRA Aug. 10
Lennar Corp. LEN Aug. 7
McDonald’s Corp. MCD Aug. 7
Mastercard, Inc. MA Aug. 6
United Health Group, Inc. UNH Aug. 6
Kansas City Southern KSU Aug. 6
Industrial Select Sector SPDR XLI Aug. 6
Verizon Communications, Inc. VZ Aug. 5
Sunrun, Inc. RUN Aug. 5
Coeur Mining, Inc. CDE Aug. 5
FireEye, Inc. FEYE Aug. 4
Amkor Technology, Inc. AMKR Aug. 4
Utilities Select Sector SPDR XLU Aug. 3
Jabil, Inc. JBL Aug. 3
Southern Copper Corp. SCCO Aug. 3
AMAG Pharmaceuticals, Inc. AMAG July 31
Agco Corp. AGCO July 31
Penn National Gaming, Inc. PENN July 30
At Home Group, Inc. HOME July 30
Procter & Gamble Co. PG July 29
SPDR S&P Metals & Mining ETF XME July 28
iShares MSCI South Korea ETF EWY July 28
HCA Healthcare, Inc. HCA July 28
Toll Brothers, Inc. TOL July 27
Landstar System, Inc. LSTR July 27
HP, Inc. HPQ July 24
Advanced Micro Devices, Inc. AMD July 23
AstraZeneca AZN July 23
Best Buy Co., Inc. BBY July 22
iShares Europe ETF IEV July 21
Fastenal Co. FAST July 21
Materials Select Sector SPDR XLB July 20
Caterpillar, Inc. CAT July 20
Monster Beverage Corp. MNST July 20
Palo Alto Networks, Inc. PANW July 20
iShares U.S. Home Construction ETF ITB July 17
Progressive Corp. PGR July 17
Livongo Health, Inc. LVGO July 17
Roku, Inc. ROKU July 16
Catalent, Inc. CTLT July 16
Cognizant Technology Solutions, Inc. CTSH July 16
Health Care Select Sector SPDR XLV July 16
Consumer Staples Select Sector SPDR XLP July 15
Home Depot, Inc. HD July 15
Costco Wholesale Corp. COST July 15
Kirkland Lake Gold, Ltd. KL July 15
MaxLinear, Inc. MXL July 14
Air Products & Chemicals, Inc. APD July 14
Consumer Discretionary Select Sector SPDR XLY July 13
Alphabet, Inc. GOOGL July 13
Sony Corp. SNE July 13
Eldorado Gold Corp. EGO July 13
SunPower Corp. SPWR July 13
Amgen, Inc. AMGN July 9
Zendesk, Inc. ZEN July 9
D.R.Horton, Inc. DHI July 9
Taylor Morrison Home Corp. TMHC July 9
LGI Homes, Inc. LGIH July 8
Walmart, Inc. WMT July 8
J.B. Hunt Transport Services, Inc. JBHT July 8
Akamai Technologies, Inc. AKAM July 6
Verisk Analytics, Inc. VRSK July 6
Big Lots, Inc. BIG July 1
Tandem Diabetes Care, Inc. TNDM July 1
Dell Technologies, Inc. DELL June 30
Zebra Technologies Corp. ZBRA June 30
Yeti Holdings, Inc. YETI June 25
Danaher Corp. DHR June 24
RH RH June 24
Hologic, Inc. HOLX June 23
First Solar, Inc. FSLR June 22
SPDR S&P Biotech ETF XBI June 19
Lowe’s Companies LOW June 19
Fiverr International, Ltd. FVRR June 19
Chegg, Inc. CHGG June 18
Etsy, Inc. ETSY June 17
Skyworks Solutions, Inc. SWKS June 16
Lululemon Athletica, Inc. LULU June 16
Carvana Co. CVNA June 10
Williams-Sonoma, Inc. WSM June 9
HubSpot, Inc. HUBS June 8
Square, Inc. SQ June 8
United Parcel Service, Inc. UPS June 5
Xilinx, Inc. XLNX June 4
KLA Corp. KLAC June 4
FedEx Corp. FDX June 3
SPDR S&P Retail ETF XRT June 3
iShares MSCI Japan ETF EWJ May 29
SolarEdge Technologies, Inc. SEDG May 29
Splunk, Inc. SPLK May 28
Microchip Technology, Inc. MCHP May 27
Synopsis, Inc. SNPS May 27
Twilio, Inc. TWLO May 26
Take-Two Interactive Software, Inc. TTWO May 26
Lam Research Corp. LRCX May 26
Marvell Technology Group, Ltd. MRVL May 26
Cisco Systems, Inc. CSCO May 21
Cree, Inc. CREE May 20
Applied Materials, Inc. AMAT May 19
iShares Silver Trust SLV May 15
Agnico Eagle Mines, Ltd. AEM May 15
Agilent Technologies, Inc. A May 15
Halozyme Therapeutics, Inc. HALO May 15
Wix.com, Ltd. WIX May 13
Extreme Networks, Inc. EXTR May 13
Qualcomm, Inc. QCOM May 12
Kinross Gold Corp. KGC May 11
Salesforce.com, Inc. CRM May 8
Facebook, Inc. FB May 7
Spotify Technology S.A. SPOT May 5
CrowdStrike Holdings, Inc. CRWD May 4
Inphi Corp. IPHI Apr. 29
Qorvo, Inc. QRVO Apr. 29
Old Dominion Freight Line, Inc. ODFL Apr. 29
Dollar General Corp. DG Apr. 28
AngloGold Ashanti Ltd. AU Apr. 28
Cadence Design Systems, Inc. CDNS Apr. 27
ServiceNow, Inc. NOW Apr. 27
Five9, Inc. FIVN Apr. 24
Chewy, Inc. CHWY Apr. 24
Tesla, Inc. TSLA Apr. 23
Shopify, Inc. SHOP Apr. 23
iShares Nasdaq Biotechnology ETF IBB Apr. 21
Teradyne, Inc. TER Apr. 20
Electronic Arts, Inc. EA Apr. 20
VanEck Vectors Semiconductor ETF SMH Apr. 17
Coupa Software, Inc. COUP Apr. 17
Veeva Systems, Inc. VEEV Apr. 17
American Tower Corp. AMT Apr. 17
Okta, Inc. OKTA Apr. 16
Target Corp. TGT Apr. 16
Netflix, Inc. NFLX Apr. 14
VanEck Vectors Gold Miners ETF GDX Apr. 14
Invesco QQQ Trust QQQ Apr. 14
Ciena Corp. CIEN Apr. 6
DocuSign, Inc. DOCU Apr. 3
Zscaler, Inc. ZS Apr. 3
RingCentral, Inc. RNG Mar. 30
Activision Blizzard, Inc. ATVI Mar. 30
Regeneron Pharmaceuticals, Inc. REGN Mar. 30
Apple, Inc. AAPL Mar. 27
Nvidia Corp. NVDA Mar. 27
Dexcom, Inc. DXCM Mar. 27
Amazon.com, Inc. AMZN Mar. 26
Stamps.com, Inc. STMP Mar. 26
Domino’s Pizza, Inc. DPZ Mar. 20
Kroger Co. KR Mar. 19
Zoom Video Communications, Inc. ZM Mar. 19
iShares MSCI Emerging Markets ETF EEM Mar. 19
Newmont Corp. NEM Jan. 13
SPDR Gold Shares ETF GLD Jan. 2
Teledoc Health, Inc. TDOC Nov. 1
Microsoft Corp. MSFT Feb. 22
* Click each symbol for current chart.

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