The Technical Indicator: Charting market cross currents, S&P 500 violates the breakout point

Against this backdrop, the S&P 500 and Nasdaq Composite remain relatively resilient, though key technical tests are in play, and the bigger-picture technicals are not one-size-fits-all.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, -0.10%  hourly chart highlights the past two weeks.

As illustrated, the S&P has extended its October downturn, violating the breakout point (3,428).

The downturn places the 50-day moving average, currently 3,408, firmly under siege. Tuesday’s early session high (3,407.9) has matched the 50-day amid an extended retest.

Delving slightly deeper, the February peak (3,393) marks a familiar inflection point.

Meanwhile, the Dow Jones Industrial Average DJIA, -0.51%  has drawn more aggressive selling pressure.

In its case, the blue-chip benchmark has placed distance firmly under its 50-day moving average, currently 28,012.

The prevailing downturn punctuates a failed test of major resistance, circa 28,400, an area also detailed on the daily chart. Bearish price action.

Against this backdrop, the Nasdaq Composite COMP, +0.59% remains stronger than the other benchmarks, narrowly holding its 50-day moving average, currently 11,317.

Still, the index has violated its first notable support — the 11,448-to-11,460 area — an inflection point also detailed below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has extended its late-October downturn.

In the process, the index has violated its first notable support (11,460) an area closely matching the October gap and its former projected target.

On further weakness, the 50-day moving average, currently 11,317, is followed by the breakout point (11,245). An eventual violation of these areas would raise a caution flag.

Delving deeper, likely last-ditch support matches the October low (11,033), the level from which the early-month rally originates. The Nasdaq’s intermediate-term bullish bias gets the benefit of the doubt barring a violation.

Looking elsewhere, the Dow industrials’ backdrop remains softer than the other benchmarks.

Consider that its prevailing downturn originates from resistance closely matching its former range top (28,400). (The S&P and Nasdaq violated their corresponding levels just Monday.)

More immediately, the index has violated its 50-day moving average, exhibiting relative weakness versus the other benchmarks. Monday’s 650-point single-session plunge marked the Dow’s worst day since early September.

Tactically, recall that the 50-day moving average (in blue) underpinned the May, June and late-July lows.

So viewed in isolation, the Dow’s aggressive downdraft under the 50-day raises an intermediate-term caution flag.

Meanwhile, the S&P 500 remains relatively stronger than the Dow industrials.

Still, Monday’s downturn inflicted the first notable damage in weeks.

Specifically, the S&P has violated its breakout point (3,428), pulling in to an extended test of the 50-day moving average, currently 3,408.

The bigger picture

Collectively, a previously tame October pullback has started to inflict technical damage in spots.

Amid the cross currents, the prevailing bigger-picture backdrop is not one-size-fits-all.

On a headline basis, the Dow Jones Industrial Average has violated its 50-day moving average, the Nasdaq Composite has maintained its 50-day, and the S&P 500 has split the difference, gravitating to its 50-day moving average.

To be sure, the prevailing backdrop does not hinge on the 50-day moving average — or any single variable — though the trending indicator in this case exemplifies a market divergence. The major benchmarks are doing slightly different things.

Moving to the small-caps, the iShares Russell 2000 ETF is digesting a rally to eight-month highs.

Tactically, notable support broadly spans from about 158.80 to 159.80, levels closely matching the post-breakout low and the breakout point.

An extended retest is underway amid this week’s increased volume.

Similarly, the SPDR S&P MidCap 400 ETF has sustained a break to eight-month highs.

In its case, notable support broadly spans from about 356.40 to 360.20.

Combined, the small- and mid-cap benchmarks are acting well technically — based on today’s backdrop — though a violation of the breakout points would raise a question mark.

Looking elsewhere, the SPDR Trust S&P 500 SPY, -0.14%  has extended its October downturn amid increased volume.

In the process, the SPY has edged under its 50-day moving average, currently 340.25.

Tactically, major support matches the February peaks — the 338.34-to-339.08 area — levels formerly defining the SPY’s record highs.

Placing a finer point on the S&P 500, the index has violated major support (3,428), a familiar inflection point detailed repeatedly.

This area effectively underpinned last week’s price action. The pending retest from underneath should be a useful bull-bear gauge.

More immediately, an extended test of the S&P’s 50-day moving average, currently 3,408, remains underway. To reiterate, Tuesday’s early session high (3,407.9) has matched the 50-day.

On further weakness, the former breakout point (3,393) rests nearby, a level matching the February peak.

Delving deeper, likely last-ditch support (3,328) matches the late-September gap — also the early-2020 breakout point — an area from which the steep early-October rally originates.

As always, it’s not just what the benchmarks do, it’s how they do it. But generally speaking, the S&P 500’s intermediate-term bias remains bullish barring a violation of the 3,328 area.

Also see: Charting a successful technical test, S&P 500 nails the breakout point.

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 S&P Retail ETF XRT, -0.06%  is acting well technically. (Yield = 1.2%.)

The group started October with a strong-volume rally, rising to tag record highs.

By comparison, the subsequent pullback has been flat, likely positioning the group to extend its uptrend.

Tactically, the breakout point (53.30) is followed by the 50-day moving average, currently 51.98. Delving slightly deeper, an inflection point matches the early-October gap and the late-September range top (51.60). A posture higher signals a bullish bias.

More broadly, the group remains well positioned on the three-year chart, rising from a continuation pattern hinged to the massive early-2020 V-shaped reversal.

Meanwhile, the SPDR S&P Regional Banking ETF — profiled Monday — continues to act well technically. (Yield = 3.4%.)

As illustrated, the group has knifed atop its 200-day moving average, rising to briefly tag four-month highs. The strong-volume rally punctuates a double bottom defined by the July and September lows.

Underlying the upturn, the group’s relative strength index (not illustrated) has also registered four-month highs, improving the chances of more decisive follow-through.

Tactically, the 200-day moving average, currently 40.22, closely matches the group’s former range top. A breakout attempt is in play barring a violation.

Moving to specific names, Logitech International S.A. LOGI, +1.87%  is a large-cap Switzerland-based manufacturer of computer peripherals.

Earlier this month, the shares gapped to all-time highs, rising sharply after the company’s second-quarter results. The ensuing pullback has been fueled by decreased volume, placing the shares 11.5% under the October peak.

Tactically, the breakout point (81.20) closely matches the bottom of the gap. A sustained posture higher signals a firmly-bullish bias.

Initially profiled Sept. 23 — amid the rally atop trendline resistance — Datadog, Inc. DDOG, +1.79%  has added 6.8% and remains well positioned.

The shares concluded September with a strong-volume spike, ultimately reaching record territory.

More immediately, the prevailing pullback has been fueled by decreased volume, placing the shares near the breakout point (98.00) and 18.4% under the October peak.

Delving deeper, the ascending 50- and 100-day moving averages have marked inflection points. The prevailing uptrend is intact barring a violation.

Dentsply Sirona, Inc. XRAY, -0.31%  is a large-cap developer of dental products and related technologies.

Technically, the shares have recently knifed atop trendline resistance, rising after an analyst upgrade. The subsequent pullback has been comparably flat, fueled by decreased volume, positioning the shares to build on the initial breakout.

Tactically, the trendline pivots to support, and is closely followed by the 200-day moving average, currently 45.30. The prevailing recovery attempt is intact barring a violation.

Also notice the pending golden cross — or bullish 50-day/200-day moving average crossover — signaling that the intermediate-term uptrend has overtaken the longer-term trend.

Initially profiled Aug. 24, Expedia Group, Inc. EXPE, -4.25%  has edged slightly higher and remains well positioned.

As illustrated, the shares have rallied to the range top, rising to challenge eight-month highs.

The strong-volume upturn punctuates an extended test of trendline support. Tactically, a near-term floor matches the former range top (97.30). A breakout attempt is in play barring a violation.

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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.