The Technical Indicator: Bull ‘trend’ intact, S&P 500 inches toward record territory

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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’ bigger-picture backdrop remains bullish, and continues to strengthen, amid constructive October price action.

On a headline basis, the S&P 500 has sustained its break to a higher plateau, rising within striking distance of record territory just ahead of the best six months seasonally — November through April.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, +0.18%  hourly chart highlights the past two weeks.

As illustrated, the S&P has flatlined, digesting recent gains. The hourly chart illustrates a flag-like pattern pinned to the mid-October breakout.

Tactically, the range top (3,008) matches next resistance, initially detailed last week. Conversely, the breakout point (2,989) is followed by deeper gap support (2,960).

Meanwhile, the Dow Jones Industrial Average DJIA, +0.29%  has pulled in modestly, pressured amid Boeing Co.’s recent plunge.

(The Dow is a price-weighted index, unlike the other widely-tracked benchmarks, meaning that higher-priced components are more influential. Boeing is the highest-priced of the Dow industrials’ 30 components, making it the most influential individual name.)

The downturn punctuates a retest of next resistance (27,088), an area also detailed on the daily chart.

Against this backdrop, the Nasdaq Composite COMP, -0.12%  is holding its range top.

Recall that major resistance matches the April peak (8,176) an area that has initially capped the prevailing rally attempt. Conversely, major support, circa 8,059, has effectively underpinned the mid-October breakout.

Both areas are also detailed below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has sustained its break to a higher plateau, signaling a bullish intermediate-term bias.

To reiterate, major support matches the July gap (8,059) and the September gap (8,061). This area has underpinned the prevailing range.

Conversely, next resistance matches the April peak (8,176), an area that has initially drawn modest selling pressure.

Looking elsewhere, the Dow Jones Industrial Average is also traversing a higher plateau.

Overhead inflection points match the July gap — at 27,088 and 27,135 — an area that has capped the October upturn.

Conversely, the top of the October gap (26,694) matches the April peak (26,696), an area that pivots to support.

(On a granular note, the April peak has underpinned the Dow’s prevailing range, and capped the Nasdaq’s corresponding range — almost precisely.)

Meanwhile, the S&P 500 has sustained a break to its former range, territory matching its July and September ranges.

To reiterate, notable support spans from 2,960 to 2,963, levels matching the September and October gaps respectively.

The bigger picture

As detailed above, the major U.S. benchmarks are acting well technically. Each index has sustained its mid-October breakout, asserting a higher plateau amid still muted selling pressure.

Moving to the small-caps, the iShares Russell 2000 ETF remains the weakest widely-tracked U.S. benchmark.

Nonetheless, the small-cap benchmark has placed distance atop its 200-day moving average, currently 152.54. The prevailing upturn punctuates a successful test of the range bottom.

Meanwhile, the SPDR S&P MidCap 400 has extended its recent break atop the 50- and 200-day moving averages, rising to next resistance.

Recall that the MDY’s 50-day moving average has marked a 2019 bull-bear inflection point.

Looking elsewhere, the SPDR Trust S&P 500 has sustained its October rally to a higher plateau.

The chart illustrates a developing double bottom, the “W” formation defined by the August and October lows. To reiterate, major support spans from 294.95 to 295.57, levels matching the May peak and the post-breakout low.

Placing a finer point on the S&P 500, the index has stabilized at a higher plateau as October volatility recedes.

Recall that the mid-month gap higher placed the index atop major resistance at 2,943 and 2,960.

The subsequent pullback has been flat, and punctuated by modest follow-through to near-term resistance (3,008). Bullish price action.

On further strength, the September peak (3,022) is closely followed by the S&P’s record close (3,025.86) and absolute record peak (3,027.98).

Conversely, the S&P’s intermediate-term bias remains bullish barring a violation of major support. A familiar inflection point holds in the 2,943-to-2,960 area, territory matching the 50-day moving average, currently 2,949.

Beyond technical levels, the best six months seasonally — November through April — are just seven sessions away, an added tailwind amid recently improved price action.

Also see: Charting a bullish technical tilt, Nasdaq ventures atop major resistance (8,060).

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.

Currency cross currents persist amid global-market rally attempt

Drilling down further, noteworthy currency cross currents remain in play amid the October global-market rally attempt. Quickly consider three currencies, initially detailed last week:

To start, the Invesco CurrencyShares Japanese Yen Trust has turned lower, pressured partly amid an October risk-on trade.

The downturn originates from the breakdown point, an area closely matching the 50-day moving average.

More immediately, major support matches the 200-day moving average (87.38) and is currently under siege. An eventual violation would raise a technical red flag (for the yen), and resolve a head-and-shoulders top defined by the June, August and October peaks.

Similarly, the Invesco U.S. Dollar Bullish Fund UUP, +0.08%  has staged an October downturn, extending a pullback from 10-year highs.

In the process, the dollar has violated trendline support, the 50-day moving average, and the September range bottom (26.67). The downturn signals an intermediate-term trend shift.

More broadly, the tandem Japanese yen and U.S. dollar downturns are consistent with increased investor risk appetite, or a risk-on trade. These are safe-haven currencies amid periods of market stress.

Separately, recall that the dollar’s downturn has surfaced amid a recently rising 10-year Treasury note yield, also consistent with a risk-on trade. The dollar would conventionally strengthen amid rising Treasury yields.

As always, a softer dollar is generally U.S. equity market supportive.

Meanwhile, the Invesco CurrencyShares Euro Trust FXE, -0.06%  has strengthened to start October. The U.S. dollar and euro are inversely correlated.

Technically, the FXE has placed distance atop trendline resistance, the breakdown point (105) and the 50-day moving average. The breakout signals a trend shift.

Tactically, the trendline pivots to support, circa 104, and the FXE’s intermediate-term bias remains bullish barring a violation.

Beyond currencies, the iShares MSCI South Korea ETF EWY, +0.98%  is showing signs of life. (Yield = 1.3%.)

Earlier this month, the shares cleared trendline resistance, rising to challenge well-defined resistance. The breakout signals a trend shift.

More immediately, the shares have tagged a three-month high, rising to press the marquee 200-day moving average, currently 58.72. The 200-day has capped the shares since April and a close higher would incrementally strengthen the bull case.

Tactically, gap support (57.46) is closely followed by the trendline, and the prevailing rally attempt is intact barring a violation.

Moving to specific names, Nvidia Corp. NVDA, +0.12%  is a well positioned large-cap semiconductor name.

As illustrated, the shares have recently knifed to 11-month highs, clearing resistance matching the May and September peaks.

By comparison, the ensuing pullback has been flat — underpinned by the breakout point (186.50) — positioning the shares to build on the mid-October spike. Delving deeper, the 50-day moving average has marked an inflection point, and a posture higher supports a bullish intermediate-term bias.

More broadly, the shares are well positioned on the three-year chart, rising from a double bottom underpinned by the 200-week moving average.

Keysight Technologies, Inc. KEYS, -0.18%  is a large-cap developer of electronic design and test solutions, and a contributor to the 5G buildout.

The shares initially spiked eight weeks ago, gapping to record highs after the company’s third-quarter results. The subsequent sideways consolidation phase has been underpinned by the breakout point and trendline support.

More immediately, the shares have tagged a nominal record high, edging to uncharted territory this week amid increased volume. An intermediate-term target projects to the 112 area on follow-through.

Finally, Williams-Sonoma, Inc. WSM, +0.52%  is a well positioned large-cap speciality retailer. (Yield =2.8%)

Technically, the shares have rallied to well-defined resistance, briefly tagging 52-week highs.

Recent persistence at the range top signals muted selling pressure, improving the chances of eventual follow-through. Tactically, a breakout attempt is in play barring a violation of near-term support, circa 68.50.

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.