The Technical Indicator: Charting the S&P 500’s slow-motion approach of 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 continue to grind higher amid a bullish second-quarter start.

In the process, the S&P 500 has reached less-charted territory at six-month highs, rising within striking distance of its record close (2,930.75). The pending retest from underneath will likely add color.

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 sustained a break to six-month highs. Monday’s session low (2,896) matched the breakout point punctuating a successful retest.

Conversely, last week’s high (2,910.5) registered slightly under the S&P’s 2,912 target, detailed repeatedly.

Meanwhile, the Dow Jones Industrial Average DJIA, +0.13%  is traversing a jagged near-term range.

Still, the index has spiked from its range bottom, gapping atop major resistance. The specific area matches a six-month range top — spanning from 26,241 to 26,282 — better illustrated on the daily chart.

On further strength, the April closing peak (26,425) is closely followed by the absolute April peak (26,487).

True to recent form, the Nasdaq Composite COMP, +0.36%  remains the strongest major benchmark.

The index has tagged six month highs across four straight sessions amid still muted April selling pressure.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq is digesting its latest break to six-month highs. The April bull flag is a continuation pattern, improving the chances of incremental upside.

From current levels, the 8,000 mark is followed by the Nasdaq’s record close (8,109) and absolute record peak (8,133).

Looking elsewhere, the Dow Jones Industrial Average has reclaimed major resistance matching the February and November peaks — the 26,240-to-26,280 area.

On further strength, more distant inflection points match the January 2018 peak (26,616) and September peak (26,769).

More broadly, the Dow continues to lag slightly behind — it remains capped by the early-April peak — though this six-month backdrop supports a comfortably bullish bias.

Meanwhile, the S&P 500 has staged a bull-flag breakout, clearing the 2,900 mark.

The upturn originates from major support (2,873) a level matching last week’s low (2,873.3). Bullish price action.

The bigger picture

As detailed above, the major U.S. benchmarks are acting well technically. Broadly speaking, each benchmark’s near- to intermediate-term bias remains comfortably bullish.

Moving to the small-caps, the iShares Russell 2000 ETF continues to lag slightly behind.

Still, the small-cap benchmark’s grinding-higher April rally has placed the range top within striking distance. To reiterate, resistance broadly spans from about 158.80 to 159.50.

Meanwhile, the SPDR S&P MidCap 400 has broken out, reaching less-charted territory at six-month highs.

Tactically, the breakout point, circa 355, pivots to support. Conversely, recall that a projected target from the March low closely matches the MDY’s all-time high (374.10).

More broadly, the small- and mid-caps are rising from inverse head-and-shoulders patterns defined by the October, December and March lows. The mid-cap benchmark has resolved its pattern, while the Russell 2000’s remains in progress.

Looking elsewhere, the SPDR Trust S&P 500 SPY, +0.11% has staged a slow-motion break to six-month highs. Tactically, the SPY’s first notable support (288.90) closely matches the early-April peak.

Against this backdrop, the S&P 500 continues to grind higher amid muted April selling pressure.

The prevailing upturn punctuates a successful test of major support (2,873) a level precisely matching last week’s low. As always, technical price action within an uptrend is constructive

Conversely, recall that the 2,912-to-2,916 area marks an overhead inflection point, levels matching a projected target and the August peak. (See the March 13 review, introducing the 2,912 target.)

Last week’s high (2,910.5) registered slightly under the target.

On further strength, the S&P’s record close (2,930.75) and absolute record peak (2,940.91) remain just slightly more distant. An eventual retest looks increasingly likely.

Beyond specific levels, the S&P 500’s near- to intermediate-term path of least resistance continues to point firmly higher pending signs of a bearish pulse.

See also: Charting the S&P 500’s approach of the 2,900 mark.

See also: Charting a bullish second-quarter start, S&P 500 nails major resistance (2,873).

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 Europe ETF IEV, +0.18%  is acting well technically.

The shares initially spiked four weeks ago, knifing atop the 200-day moving average. The subsequent pullback has been underpinned by the 200-day, an area closely matching the breakout point.

More immediately, the shares have edged from a tight April range, reaching a nominal six-month high.

The slight breakout dovetails with a golden cross, or bullish 50-day/200-day moving average crossover. Tactically, the ascending 50-day moving average (43.20) has tracked the recent trends — both bull and bear trends — and the prevailing uptrend is intact barring a violation.

Moving to U.S. sectors, the Consumer Staples Select Sector SPDR XLP, -0.19%  has come to life technically. (Yield = 2.7%.)

As illustrated, the group has rallied to challenge five-month highs, pressing resistance matching the December peak.

The prevailing upturn originates from a successful test of the breakout point (55.00) an area matching trendline support pinned to the December low. Put differently, the group is effectively rising from a year-to-date ascending triangle.

Tactically, near-term support (56.20) is followed by the April low (55.05) and a breakout attempt is in play barring a violation.

Initially profiled Oct. 24, Dow 30 component McDonald’s Corp. MCD, -0.02%  has returned 8.2% and remains well positioned. (Yield = 2.4%.)

Technically, the shares have edged to all-time highs, clearing resistance matching the November peak. The upturn comes from a tight two-week range, laying the groundwork for a potentially more decisive breakout.

More broadly, the chart illustrates a modified double bottom with platform, a pattern defined by the December and February lows. An intermediate-term target projects to the 204 area on follow-through.

Micron Technology, Inc. MU, +2.38%  is a large-cap semiconductor name showing signs of life.

As illustrated, major resistance broadly spans from about 42.40 to 44.00, levels matching the 200-day moving average and a six-month range top. A near-term target projects to the 49 area on follow-through.

Conversely, the April low (41.20) is closely followed by trendline support tracking the 50-day moving average, currently 40.95. A breakout attempt is in play barring a violation.

Initially profiled Jan. 16, Coupa Software, Inc. COUP, -0.95%  has returned 41.4% and remains well positioned.

Technically, the shares have rallied to the range top, rising to challenge record territory. (The March peak (100.00) defines the all-time high.)

More broadly, the chart illustrates a continuation pattern, an orderly 10-week range pinned to the steep January rally. An intermediate-term target projects to the 110 area on follow-through.

Tactically, near-term support points hold in the 95.60 and 93.60 areas, and a breakout 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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