The Technical Indicator: Charting a delayed breakout attempt, S&P 500 hesitates near record territory

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 major U.S. benchmarks’ bigger-picture backdrop remains bullish.

Though each index topped last week slightly under record territory — for a second time, in as many weeks — the September selling pressure remains muted, thus far, preserving a late-year breakout attempt.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, -0.98%  hourly chart highlights the past two weeks.

As illustrated, the S&P is acting well technically, traversing an orderly late-September range.

Tactically, a familiar floor matches the breakout point (2,989). The S&P has registered nine consecutive closes higher.

Delving deeper, gap support (2,960) is followed by the 50-day moving average, currently 2,951.

Similarly, the Dow Jones Industrial Average DJIA, -0.74%  has asserted an orderly near-term range.

Here again, the breakout point (26,900) marks a notable floor, detailed repeatedly. Last week’s low — established after the Federal Reserve’s policy statement — registered within one point.

Against this backdrop, the Nasdaq Composite COMP, -1.52%  has also pulled in from the September peak.

In the process, the index has ventured slightly under its breakout point (8,134) unlike the other benchmarks. (Monday’s session high (8,135) matched resistance.)

Delving deeper, a near-term floor (8,085) is followed by the much firmer 8,060 area, also detailed on the daily chart below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq Nasdaq continues to digest the early-September breakout.

As detailed repeatedly, the 50-day moving average, currently 8,055, closely matches the July gap (8,059) and the top of the September gap (8,061). A posture atop this area signals a bullish intermediate-term bias.

Looking elsewhere, the Dow Jones Industrial Average has pulled in modestly from the range top.

Recall that the September peak registered 92 points under the Dow’s all-time high.

Tactically, the April peak (26,696) is closely followed by the 50-day moving average, currently 26,604. (The top of the September gap (26,603) matches the 50-day.)

Slightly more broadly, the Dow’s intermediate-term bias remains bullish barring a violation of the former range top (26,427).

Meanwhile, the S&P 500 topped last week six points under its all-time high (3,028).

The subsequent pullback has been orderly, underpinned by first support (2,989), an area better illustrated on the hourly chart.

The bigger picture

As detailed above, the major U.S. benchmarks are acting well technically.

Though each benchmark has recently topped slightly under its record high, the prevailing pullback has ben orderly, inflicting limited damage.

Moving to the small-caps, the iShares Russell 2000 ETF has extended a downturn from next resistance (158.00).

More broadly, the early-September spike was directionally sharp — fueled by a sustained volume increase — while the prevailing downturn has registered as comparably flat. Constructive price action.

Meanwhile, the SPDR S&P MidCap 400 has also pulled in modestly from resistance.

The downturn preserves a range-bound backdrop, though a developing double bottom — defined by the May and August lows — remains in progress. An eventual break atop resistance in the 262.00-to-262.90 area would resolve the bullish reversal pattern.

Looking elsewhere, the SPDR Trust S&P 500 remains incrementally stronger.

Recall that last week’s high (302.63) marked the SPY’s latest fractional record peak amid still relatively muted September selling pressure.

Placing a finer point on the S&P 500, its September price action remains constructive.

To be sure, the index has thus far balked at record territory, topping last week (3,022) six points under its all-time high (3,028).

Still, the prevailing downturn has thus far inflicted limited damage. The S&P has registered nine straight closes atop first support (2,989), also absorbing Fed-related volatility introduced last Wednesday.

On further weakness, the top of the September gap (2,960) is followed by the 50-day moving average, currently 2,951. (The S&P has not closed under the 50-day since Sept. 5, the session defining the September gap.)

Delving deeper, more important support matches the former range top (2,943) a level that capped the jagged August price action. As detailed repeatedly, the S&P 500’s intermediate-term bias remains bullish barring a violation.

Also see: Bull trend absorbs oil shock, S&P 500 maintains first support.

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 Financial Select Sector SPDR XLF, -1.01%  is acting relatively well against a jagged 2019 backdrop.

Consider that last week’s high narrowly missed the group’s 52-week high (28.72) — its best level since precisely Sept. 24, 2018 — by a narrow five-cent margin.

But the prevailing pullback has been flat, improving the chances of eventual upside follow-through. Tactically, the 50-day moving average (27.48) closely matches the December peak (27.47) — also the late-2018 range top — and the group’s intermediate-term bias remains bullish barring a violation.

More broadly, recall that the group’s successful late-August test of major support (26.00) — detailed previously — has contributed to the broad-market September rally. (See the Aug. 29 review.)

Meanwhile, the SPDR S&P Regional Banking ETF KRE, -1.52%  is also showing signs of life.

The group started September with a steep rally atop the breakdown point (50.00), also clearing the 50- and 200-day moving averages.

More immediately, the selling pressure near trendline resistance has been muted, fueled by decreased volume, even amid recent Fed-related volatility.

Tactically, the 50- and 200-day moving averages have marked inflection points — the group has struggled to sustain a break higher — and a breakout attempt is in play barring a violation

Initially profiled July 15, Texas Instruments, Inc. TXN, -2.07%  has added 6.6% and remains well positioned. (Yield = 2.8%.)

Earlier this month, the shares tagged a nominal record high, pressing resistance matching the July peak. The subsequent pullback has been flat, laying the groundwork for a potential breakout.

Tactically, trendline support closely tracks the 50-day moving average, currently 124.15, and a breakout attempt is in play barring a violation. A near-term target projects to the 134 area on follow-through.

Apache Corp. APA, -3.02%  is a large-cap oil and gas name coming to life. (Yield = 3.8%.)

As illustrated, the shares have recently gapped sharply higher, rising on increased volume amid surging crude oil prices. The breakout confirms the early-September trend shift.

By comparison, the ensuing pullback has been orderly, fueled by decreased volume, likely laying the groundwork for upside follow-through. Tactically, the former breakdown point (25.10) pivots to support, and Apache’s recovery attempt is firmly intact barring a violation.

Proofpoint, Inc. PFPT, -1.56%  is a well positioned large-cap security software vendor.

Earlier this month, the shares knifed to the range top, rising within striking distance of record territory.

The subsequent tight September range signals muted selling pressure, positioning the shares for a potential breakout. Tactically, the 50-day moving average has marked an inflection point, and a breakout attempt is in play barring a violation.

More broadly, the chart illustrates a bullish double bottom — defined by the June and August lows — and underpinned by the 200-day moving average.

Finally, Huya, Inc. HUYA, -3.99%  is a large-cap China-based operator of game live-streaming platforms.

Technically, the shares have knifed to five-month highs, resolving a double bottom — the “W” formation — defined by the May and August lows.

Tactically, the breakout point (26.20) is followed by a near-term floor, circa 25.20, and the prevailing rally 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.

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