The Technical Indicator: Bullish momentum persists, S&P 500 sustains break to uncharted territory

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Technically speaking, the major U.S. benchmarks have sustained a break to record territory amid still conspicuously muted November selling pressure.

Against this backdrop, the big three benchmarks remain near-term extended — and are due a cooling-off period, if not a corrective pullback — though the more important longer-term market bias remains comfortably bullish.

Before detailing the U.S. markets’ wider view, the S&P 500’s SPX, -0.09%  hourly chart highlights the past two weeks.

As illustrated, the S&P has extended the November break to record territory.

The prevailing upturn punctuates a flag-like pattern defined by last week’s tight range. Tactically, the 3,100 area marks an inflection point, and is followed by a slightly deeper floor, circa 3,085.

Meanwhile, the Dow Jones Industrial Average DJIA, -0.39%  has rallied atop the 28,000 mark.

The breakout punctuates an orderly six-session range.

Tactically, near-term inflection points match last week’s gap, at 27,843 and 27,800. This is closely followed by the former range top (27,774) an area that broadly pivots to near-term support.

Against this backdrop, the Nasdaq Composite COMP, +0.24%  has also extended to record territory.

From current levels, the top of the gap (8,504) is closely followed by the former range top (8,483). This area broadly caps a mid-month flag-like pattern better illustrated below.

Widening the view to six months adds perspective.

On this wider view, the Nasdaq has staged a decisive November breakout. The nearly straightline spike punctuates a double bottom defined by the August and October lows.

To reiterate, a near-term floor matches the 8,500 area. Delving deeper, gap support (8,386) is followed by the much firmer breakout point (8,339).

More broadly, the Nasdaq remains near-term extended, and is due to consolidate at some point, though its intermediate-term bias remains firmly bullish barring a violation of the breakout point.

Looking elsewhere, the Dow Jones Industrial Average has tagged the 28,000 mark for the first time on record.

The prevailing upturn originates from the breakout point — the 27,400 mark — an area matching the July peak (27,398) and the November gap (27,402).

The post-breakout low (27,408), established Nov. 6, closely matched major support, and has been punctuated by sharp follow-through to new highs. Bullish price action.

Meanwhile, the S&P 500 has also taken flight, rising atop the 3,100 mark.

Against this backdrop, the S&P’s all-time high (3,127.6) — established early Tuesday — has registered firmly within view of its intermediate-term target (3,140) detailed repeatedly.

The bigger picture

As detailed above, the major U.S. benchmarks have broken decisively to record territory and are still refusing to materially pull in.

Moreover, the persistent November spike has been punctuated by constructive market rotation, detailed previously.

Though each big three benchmark remains near-term extended — and is due to consolidate at some point — the more important intermediate-term market bias remains firmly bullish.

Moving to the small-caps, the iShares Russell 2000 ETF IWM, +0.49%  continues to lag behind.

Still, the prevailing flag pattern is constructive amid pronounced strength elsewhere. The small-cap benchmark has thus far maintained major support (158.00) on a closing basis, positioning it to build on the steep October rally.

Meanwhile, the SPDR S&P MidCap 400 has also asserted a flag pattern, in its case digesting a break to 52-week highs.

Recall that notable support spans from 360.50 to 361.43, levels matching the post-breakout low and the November gap. A sustained posture atop this area signals a firmly bullish bias.

Looking elsewhere, the SPDR Trust S&P 500 has extended a decisive November breakout.

Tactically, near-term inflection points match the mid-month gap, at 309.64 and 310.26. Delving deeper, a firmer floor continues to span from about 307.00 to 307.40.

Placing a finer point on the S&P 500, the index has staged a striking November breakout.

To reiterate, Tuesday’s early session high (3,127.6) currently defines the S&P’s all-time high, and places its intermediate-term target (3,140) just overhead.

Against this backdrop, the S&P remains near-term extended, and is due at least a sideways chopping around phase, if not a corrective pullback. Tactically, the 3,100 area marks a near-term floor, closely matching the former range top.

Delving deeper, the S&P 500’s breakout point — the 3,022-to-3,028 area — defines more important support.

The 50-day moving average, currently 3,011, is rising toward major support, and the S&P 500’s intermediate- to longer-term bias remains bullish barring a violation.

Also see: Bull trend strengthens: S&P 500 sustains breakout amid market rotation.

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 broken out. (Yield = 1.9%.)

Specifically, the group has reached record territory, clearing resistance matching the September peak.

The breakout punctuates a massive head-and-shoulders bottom — illustrated on the three-year chart — opening the path to potentially material longer-term follow-through. As always, this is a high-reliability bullish reversal pattern.

Tactically, an intermediate-term target projects from the October range to the 85.50 area. Conversely, the neckline pivots to support (79.80) and the group’s intermediate-term bias remains bullish barring a violation.

Initially profiled Sept. 18, Dow 30 component Intel Corp. INTC, -0.19%  has returned 12.1% and remains well positioned. (Yield = 2.1%.)

Late last month, the shares gapped sharply higher, rising amid a volume spike after the company’s quarterly results.

The subsequent follow-through places Intel’s 19-year high — a level matching the April peak (59.59) — slightly above current levels.

More broadly, the shares are well positioned on the three-year chart, rising from a massive double bottom defined by the October 2018 and May 2019 lows. A break atop the April peak would resolve the pattern, opening the path to much less-charted territory, and potentially material follow-through.

Tactically, gap support (56.85) closely matches the prevailing range bottom. A breakout attempt is in play barring a violation.

Public since June 2018, Avalara, Inc. AVLR, +2.23%  is a large-cap developer of cloud-based software solutions.

Technically, the shares have knifed atop trendline resistance, rising from a successful test of the 200-day moving average.

Underlying the upturn, its relative strength index (not illustrated) has registered three-month highs, improving the chances of a durable trend shift.

Tactically, trendline support closely tracks the 50-day moving average, currently 71.80, and the recovery attempt is intact barring a violation. (Also notice the pending golden cross, or bullish 50-day/200-day moving average crossover.)

Nevro Corp. NVRO, +0.00%  is a mid-cap medical device manufacturer positioned to rise.

As illustrated, the shares have recently gapped sharply higher, briefly tagging all-time highs after the company’s quarter results.

The subsequent flag pattern signals still muted selling pressure, positioning the shares to build on the strong-volume spike. Tactically, a near-term floor (27.30) matches the post-breakout low, and a sustained posture higher supports a firmly bullish bias.

More broadly, the shares are well positioned on the three-year chart, consolidating atop an inflection point matching the 2017 peak.

Finally, Kroger Co. KR, -0.52%  is a well positioned large-cap grocery store operator. (Yield = 2.4%.)

Earlier this month, the shares staged a strong-volume breakout, tagging eight-month highs after the company revised its 2020 outlook and announced a $1 billion share buyback program.

The ensuing pullback has been underpinned by the breakout point (26.20) placing the shares at an attractive entry 4% under the November peak. Delving deeper, trendline support roughly tracks the 50-day moving average, currently 25.50, 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.